NEW YORK, Aug 19: The US dollar weakened across the board on Tuesday, declining for a second straight session, as investors took advantage of weakness in US stocks to further take profits on the greenback’s recent steep gains.

The euro was on pace to post its best one-day gain in a month, while the dollar index was on track for its worst daily loss in about five weeks.

US equities plunged after a brokerage forecast that Lehman Brothers will likely take further write-downs of $4 billion in the third quarter due to losses from mortgage-related investments. A report showing sharply higher US inflation also dragged down stocks.

“The euro was due for a bounce anyway against the dollar after its sharp losses,” said Matt Kassel, director of foreign exchange at ING Capital Markets in New York.

“And overall weakness in US stocks is adding to dollar bearishness.”

In midday trading, the euro rose half a per cent to $1.4772, recovering from a six-month low of $1.4631 earlier, according to Reuters data.

On the ICE Futures Exchange, the dollar index which measures its value against a basket of six currencies fell 0.4 per cent to 76.773, after earlier hitting a new high for the year at 77.413.

Against the yen, the dollar retreated 0.4 per cent to 109.62 yen, while the euro was little changed versus the yen at 161.69 yen. Earlier, the euro hit a three-month low at 160.87 yen.

After the greenback’s slide on Tuesday, traders have started to wonder whether this latest phase of dollar strength has run its course.—Reuters