Forex - Dollar dives on surging German industrial output data

The U.S. dollar weakened against most major currencies on Tuesday after German industrial output data blew past expectations a day after factory orders did likewise in Europe's largest economy and fueled demand for risk-sensitive assets.

In U.S. trading on Wednesday, EUR/USD was up 0.58% at 1.3156.

Germany's industrial output, which includes manufacturing, mining, electricity and gas concerns, shot up 1.2% in March, the largest increase in a year and defying expectations for a 0.1% decline. 

February’s figure was revised up 0.6% from 0.5%.

The numbers bolstered hopes that the German economy, Europe's largest, may post better-than-expected growth rates for the first quarter.

During the October-December period of 2012, Germany's economy contracted by 0.5%. 

Official data released on Tuesday revealed that German factory orders climbed 2.2% in March, defying expectations for a 0.5% decline.

The string of good news out of Germany put to rest recent concerns that the European Central Bank may trim benchmark borrowing costs.

The European Central Bank recently cut interest rates by 25 basis points to 0.50.

German data suppressed expectations for further ECB loosening, which allowed the single currency to gain and bring other higher-yielding currencies up with it, which came at the dollar's expense.

Rising stock prices on Wall Street enticed investors out of the greenback as well.

The greenback, meanwhile, was down against the pound, with GBP/USDtrading up 0.35% at 1.5538.

The dollar was down against the yen, with USD/JPY down 0.10% at 98.91, and down against the Swiss franc, with USD/CHF trading down 0.51% at 0.9354.

The dollar was mixed against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.11% at 1.0034, AUD/USD down 0.19% at 1.0165 and NZD/USD trading down 0.90% at 0.8382.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.46% at 81.98. 

On Thursday, the U.S. is to publish the weekly government report on initial jobless claims.