Forex - Dollar trades flat as investors digest talk of stimulus

Forexpros - The dollar traded largely flat against most major global currencies on Wednesday as investors continued to harbor expectations the Federal Reserve and the European Central Bank will take steps to spur recovery via monetary policy.

In Asian trading on Wednesday, EUR/USD was down 0.01% at 1.2398. 

In the U.S. sagging economic indicators have prompted Federal Reserve officials to avoid ruling out jolting the economy via purchasing bonds from banks, a monetary stimulus tool known as quantitative easing, which weakens the dollar to spur more recovery.

Earlier, Federal Reserve Bank of Boston President Eric S. Rosengren said the economy merited more easing, adding unlike in past rounds, the Fed should leave the program open ended.

Past rounds were announced with a previously determined amount of assets to be bought by the Fed.

Meanwhile, Federal Reserve Chairman Ben Bernanke said earlier rates will have to stay low due to the fragile shape of the economy.

In Europe, expectations continued to build that the European Central Bank will take steps to lower borrowing costs in Spain and Italy by buying their bonds in the open market.

Such sentiment fueled demand for risk assets like stocks, which sent the dollar falling though the greenback did bounce back into positive territory from time to time in Asian trading.

Disappointing indicators out of Europe bolstered the greenback somewhat.

German factory orders fell 1.7% in June, well above expectations for a 1.0% decline. 

Meanwhile, Italy reported that its gross domestic product contracted by 0.7% in the second quarter, worse than expectations for a 0.6% contraction.

Separately, Standard & Poor's said it was sticking with its "CCC" foreign and "C" local currency credit ratings on Greece, but assigned a negative outlook on the country, which means more downgrades are possible.

The greenback, meanwhile, was up against the pound, with GBP/USDtrading down 0.04% at 1.5616.

The dollar was down against the yen, with USD/JPY trading down 0.10% at 78.52, and up against the Swiss franc, with USD/CHF trading up 0.03% at 0.9691.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.05% at 0.9974, AUD/USD down 0.09% at 1.0544 and NZD/USD down 0.33% at 0.8135.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.01% at 82.32.

Later Wednesday, the U.S. will release government data on labor costs and productivity levels, leading indicators of consumer inflation.