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Currencies: Dollar Loses Steam After Tuesday's Rally

The dollar is correcting a bit this morning after posting some large gains yesterday.

The pound, yen and euro were all moving higher versus the dollar in early trading as the memory of Tuesday's U.S. stock market gains have faded and the questions about the U.S. economy have resurfaced.

"The currency markets lucked out yesterday," said Anne Parker Mills, currency analyst at

Brown Brothers Harriman

, in reference to the effects of

Fed Chairman

Alan Greenspan's speech. Greenspan discussed the effects of a slowing economy, an acknowledgement that Wall Street had been waiting to hear. This sent U.S. markets soaring in an afternoon rally yesterday, in turn pushing the dollar up against all other major currencies.

But this morning, the currency markets are feeling a need to correct yesterday's dollar gains. It's "what the market chooses to look at," said Mills, "lower interest rates or higher stock prices." Yesterday, the rally was undoubtedly based on the 288-point gain of the

Nasdaq and the 339-point gain of the

Dow. This morning, traders are remembering the slowing U.S. economy.

Mills said that the main event in the overnight markets was that the euro crept significantly lower versus the dollar, continuing yesterday's momentum, but surprised analysts when it bounced back up earlier this morning. Mills said this is largely due to "commercial buying from European banks." Additionally, the

IMF's support in Turkey and reports of stronger-than-expected German data this morning have helped to push the euro back up.

The euro was recently trading at $0.8829, up from yesterday's close of $0.8796.

The yen is following the pack of non-U.S. global leaders and gaining on the dollar, in what Mills called "essentially a secondary issue" this morning, indicating that the yen is moving more on the European crosses than on any momentum of its own. The dollar/yen was trading at 110.66, down some from its close yesterday of 111.14. The euro/yen cross was at 97.99 recently, up from its last close of 97.69.

Across the world, currencies are ganging up on the dollar. The British pound was trading at $1.4359, up from a close yesterday of $1.4322. The Australian dollar is also up on the U.S. dollar, trading at $0.5442 from $0.5389 yesterday.

In a continuing watch of our neighbors to the north, Canada has broken from its habit of bucking the early morning trends and is moving in sync with other non-U.S. currencies this morning. The U.S. dollar was recently at C$1.5416, down from yesterday's close of $1.5427.