By Joe Manimbo of Travelex

NEW YORK ( TheStreet) -- The dollar rose on Wednesday as fresh concerns about the global economic recovery boosted it and the yen's safe-haven appeal. World stocks were mostly weaker overnight, tempting investors out of riskier currencies such as the euro, sterling and the Australian and New Zealand dollars.

For the most part, market players remain cautious after key U.S. service sector data yesterday came in below forecast, intensifying fears that the U.S. economy could slip back into recession.

Uncertainty ahead of the release of eurozone bank stress tests later this month has also helped to quench investor appetite for higher yields.

Officials in Europe will soon test about 100 euro zone banks to gauge their fiscal health amid the sovereign debt crisis that continues to afflict nations like Greece, Portugal and Spain. Ahead of the July 23 publishing of the stress test results, the euro could have a tough time testing the upper end of its recent ranges.

The Canadian dollar fell against the greenback as a pullback in market sentiment weighed on commodity-based currencies.

In the absence of U.S. data until tomorrow's weekly report of jobless claims, the greenback is likely to take its main cue from equity market movements, considered a good barometer of risk sentiment.

EUR: The euro retreated from yesterday's seven-week highs against the dollar and two-week peaks against the pound as a higher level of investor caution weighed on risk-sensitive currencies to the benefit of the greenback and the yen.

The single currency was little moved by confirmation that the eurozone economy grew by 0.2% quarter over quarter and 0.6% year over year during the first quarter of 2010, results that were exactly as expected.

However, a surprise 0.5% month-over-month fall in German industrial orders in May added to the euro's softer tone. Investors had expected industrial orders from the bloc's biggest economy to increase by 0.5% month over month in May.

The figure for April was revised to an increase of 3.2% month over month from the initially reported 2.8% gain. The euro has gained broadly after last month's tumble to a four-year low vs. the greenback.

The single currency has found support from investors paring back on extremely short euro positions and to some extent from a reduction on eurozone sovereign debt fears. Ahead of the July 23 release of area bank stress tests, the euro's upside momentum could become more limited.

GBP: The U.K. currency registered modest declines Wednesday from a reduction in risk appetite. Optimism about the recent unveiling of a tough U.K. budget designed to slash the nation's massive debt load has started to recede, giving way to concerns about the outlook for British economic growth.

Investors fear that such harsh pay cuts and tax hikes will significantly crimp U.K. growth and delay any increase in British interest rates, a scenario that tarnishes the pound's yield outlook. The Bank of England starts a two-day meeting today that is expected to conclude tomorrow with no change to the central bank's 0.5% benchmark interest rate.

CHF: The Swiss franc maintained its broadly weaker tone after data yesterday showed a bigger-than-expected fall in consumer inflation. The weaker-than-expected CPI reintroduced the risk that the Swiss National Bank might have to re-enter the currency markets to slow the Swiss franc's rise. Just last month, the SNB had dropped a pledge to intervene to halt the franc's rise, which poses risks to the export-dependent economy.

USD: The dollar regained some of its footing after falling yesterday to a two-month low against a basket of major currencies and to a seven-week low against the euro. Dollar sentiment has been hurt by a string of recent dismal results on the consumer and jobs and housing markets that have added to fears of a double-dip recession in the U.S. Poor U.S. data also sting the buck by suggesting the Fed has more time to keep U.S. borrowing costs near zero.