Investing.com - The dollar slid against most major currencies Tuesday as investors avoided the safe-harbor currency and chased higher-yielding asset classes on sentiments that the Obama administration and Congress are moving closer to agreeing on 2013 fiscal framework, which will steer the country away from a recession.
In U.S. trading on Tuesday, EUR/USD was 0.44% at 1.3222 after Standard & Poor's upgraded Greece's sovereign credit rating to B-minus with a stable outlook from selective default bolstered the currency as well.
The ratings agency based its decision on Greece's successful bond buyback.
The U.S. dollar saw downward pressure on hopes Washington policymakers will push through fiscal reforms and avoid recession next year.
At the end of 2012, the Bush-era tax breaks and other benefits are set to expire at the same time cuts to government spending are scheduled to kick in, a combination known as a fiscal cliff that could contract the economy by 0.5% next year if Congress fails to avoid it, according to Congressional Budget Office estimates.
Both sides of the U.S. political aisle have disagreed over the role income tax reforms should play when it comes to crafting a 2013 fiscal framework, with Democrats originally calling for tax hikes on those earning at least USD250,000 a year, with Republicans originally opposed to tax hikes for anyone.
The two political parties have since made concessions, with Republicans warming up to tax hikes on the wealthy by offering to raise rates on those earning a minimum USD1 million a year, with Democrats reportedly countering by raising the floor to USD400,000 from USD250,000.
Reports of a spirit of compromise sent the dollar falling amid a risk-on trading session, despite Democratic Senate Majority Leader Harry Reid's comments that Republicans were walking away from the latest deal.
Elsewhere, the U.S. current account deficit narrowed in the third quarter of 2012, posting the smallest deficit since the fourth quarter of 2010, government data revealed earlier Tuesday.
The U.S. Bureau of Economic Analysis reported earlier that the country's current account deficit narrowed to a seasonally adjusted USD107.5 billion in the third quarter from a revised deficit of USD118.1 billion.
Analysts had expected the U.S. current account deficit to narrow to USD103.4 billion in the third quarter.
The greenback, meanwhile, was down against the pound, with GBP/USD trading up 0.28% at 1.6249.
U.K. inflation figures kept Cable in positive territory.
The U.K. Office for National Statistics reported earlier that the annual rate of consumer price inflation in the U.K. remained unchanged at 2.7% in November after an unexpected increase in October, beating out expectations for a dip to 2.6%.
On a month-on-month basis, the U.K. consumer price index rose 0.2%, in line with expectations, after rising 0.5% in October.
Core CPI, which excludes food, energy, alcohol, and tobacco costs held steady at a seasonally adjusted 2.6% in November, unchanged from October and confounding expectations for a slight increase to 2.7%.
The dollar was up against the yen, with USD/JPY trading up 0.36% at 84.19 and down against the Swiss franc, with USD/CHF trading down 0.47% at 0.9132.
The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.21% at 0.9856, AUD/USD down 0.10% at 1.0530 and NZD/USD trading down 0.34% at 0.8422.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.31% at 79.38.
On Wednesday, the U.S. is to publish government data on building permits, an excellent gauge of future construction activity, as well as data on housing starts.
The country is also to release official data on crude oil stockpiles.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
