US Dollar
The US Dollar trades near six-week lows on 18 February.Reuters

Downbeat US economic data restrained the US dollar near six-week lows against a basket of currencies on 18 February.

The dollar index stood at 80.114 on Tuesday, near its lowest level since the beginning of the year, while gold and silver prices hovered near three-and-a-half-month highs on the back of the greenback's weakness.

As the dollar lost ground, the Euro held firm at $1.3702 on Tuesday, having hit a three-week high the day before.

The dollar recovered to 101.92 yen from a one-week low of 101.38 yen hit on 17 February as Japanese equities gained. The Nikkei 225 share average finished over 3% higher on 18 February.

"There is a bit of a fault line between the currency market and the stock market at the moment. US shares are riding on optimistic views on the US economy but the currency market is viewing the US economic fundamentals less favourably," Daisuke Uno, chief strategist at Sumitomo Mitsui Bank, told Reuters.

Adam Cole, head of G10 FX strategy at RBC Capital, said the dollar could fall to 97 yen per dollar over the next two-to-three months.

However, Cole added that ultimately the trade could be proved right. "Once we get nearer to the first Fed tightening there is scope for dollar-yen (to rise)," he told the news agency on 17 February.

17 February's Trade

The US dollar slipped to its lowest level since the beginning of the year against a basket of major currencies on 17 February, as upbeat Eurozone and China economic data overshadowed soft US data.

The dollar index fell as low as 80.065, its lowest since 1 January. The Euro touched a three-week high of $1.37245 on 17 February.

When compared to the Japanese yen, the greenback dropped to its lowest since 6 February but later recovered to trade up 0.1% at 101.89 yen on 17 February, in the wake of weaker-than-expected Japanese GDP numbers.

Volumes were thin in most currency pairs on 17 February, with US markets closed for the Presidents Day holiday and no major European data releases.

Japanese Economy

Japan's economy expanded by 0.3% during the October-December fourth quarter, over the preceding quarter, showing a pickup in capital spending and firm private consumption.

The latest reading of preliminary government data marked the fourth consecutive quarter of expansion in the world's third-largest economy.

However, the reading was below the projected 0.7% rate of economic expansion, indicating declining momentum ahead of a planned sales take hike.

US Data

A 14 February Federal Reserve report revealed an unexpected drop in January's factory output numbers in the world's leading economy.

Earlier, Fed chief Janet Yellen said the recovery in the US labour market was "far from complete.".

Yellen said last week that while the labour market had started to improve, there were still too many long-term unemployed people.

The Bureau of Labor Statistics data showed the number of non-farm payroll jobs added to the US economy in January was 113,000, much lower than the 180,000 analysts had expected.