LONDON, July 31: The dollar fell half a per cent to below 120 yen on Wednesday on sales by Japanese exporters protecting themselves from future volatility after the greenback hit its highest level in nearly four weeks.

Meanwhile, the dollar was steady near the top of its recent range at around $0.98 per euro, with the single currency receiving no support from dismal German retail sales data.

Analysts said that as the dollar had bounced up from its recent lows, Japanese exporters were hedging against future fluctuations.

When we fell down to 116, we didn’t see exporter panic. But now they are increasing their hedging above 120, said Derek Halpenny, currency economist at Bank of Tokyo Mitsubishi.

Dealers said US stock prices were still the driving force in the market and their continued fragile outlook was still clouding the outlook for the dollar. But weak euro zone data highlighted how Europe does have economic problems of its own.

German retail sales fell 2.2 per cent on the month in June while a survey showed French industry expects demand to decline in the current quarter after growing at a slower pace in the second quarter.

We’ve had some appalling data out of the euro zone. It’s possible we could see some more euro liquidation, said Halpenny.

Traders were looking ahead to release of the euro zone inflation data for July. The annual rate is expected to nudge back up to the European Central Bank ceiling of two percent from 1.8 per cent last month.

US stocks were mixed on Tuesday, with the Dow Jones industrial average falling 0.37 per cent while the Nasdaq composite edged up 0.67 per cent.

Many dealers doubt investors will rush back into US stocks in the near to medium term.

It’s difficult to be as bullish on stocks as before after we saw what happened in the past few weeks, said a fund manager at a European asset management company. So support for the dollar will likely remain weak.

In Tuesday’s US trade, the dollar came under some pressure after weaker-than-expected data.

A consumer confidence index compiled by the Conference Board, a private US research group, fell to 97.1 in July from 106.3 in June, way short of the 101.9 expected by economists.

That compounded worries that a tumble in US share prices in the past few months could take a toll on consumption so far the main contributor to the US economy.

However, in the last two weeks the dollar has risen more than four yen from a 17-month low of 115.50. The euro has also fallen about four cents from 2-1/2-year high of $1.0210 hit on July 19.

US shares have recovered considerably, with the Dow now 1,000 points above its four-year low hit last week.

NEW YORK: The dollar on Wednesday quickly recovered from a short-lived setback suffered on news the US economy grew just slightly over 1 per cent in the second quarter to stand narrowly mixed on the day.