On Wednesday, the euro fell to session lows against the strengthening dollar, the next day after China's central bank eased monetary policy to contribute to the slowing economy, while investors remain on nerves because of fears about a global economic slowdown.
EUR/USD fell 0.53% to 1.1457, retreating from eight-month high at 1.1713, reached on Monday.
The dollar regained some lost ground after yesterday's decision of the Central Bank of China to cut interest rates, which is already the second in the past two months, and which has dispelled fears that China will lead the global economic downturn.
But there are still present the concerns on whether the freefall of China’s shares, the second-largest economy in the world, will weaken. Shares in Shanghai opened higher on Wednesday, but the session ended with a fall by 1.3% in volatile trading.
The dramatic collapse of the Chinese stock market has provoked fears that it will accelerate the country's economic recession, and undermined investors’ confidence in the government's ability to revive the economy.
Markets were confused after China devalued the Yuan on August 11, causing boosted fears about the state of the economy.
The single currency strengthened as investors seek refuge in the relatively safe currencies amid intense volatility of the currency in world markets.
Demand for the euro also rose due to concerns about the global economic outlook, which forced investors to reduce expectations of an initial increase in rate by the Federal Reserve System in September.
The greenback went also higher against the yen; USD/JPY pair rose 0.5% to 119.5, being trading close to recent highs at 119.83.
The euro was little changed against the Japanese currency; EUR/JPY is traded at 136.85.
The USD index, which tracks the US currency against a basket of six major rivals, rose 0.47% to 94.36, from eight-month low at 92.52 reached on Monday.