Dollar hit by eurozone confidence gain, US GDP contraction

A surge in eurozone confidence followed by data showing a shock contraction in US economic growth helped send the dollar for another loss Wednesday.

The euro pushed sharply higher early on in European trade, topping the $1.35 level for the first time in 13 months, boosted by the confidence reading and more easing of crisis tensions in the markets.

Italian borrowing costs fell again in its sale $6.5 billion euros of medium- and long-term bonds.

The dollar's loss was exacerbated later when the US Commerce Department reported that GDP contracted 0.1 percent in the fourth quarter last year, a worse read than expected, due to sharp cuts in government spending.

Following their policy meeting later -- which kept easing measures in place -- the Federal Reserve brushed off the data, saying it represented "transitory" phenomena like adverse weather.

"The message: no let-up in Fed easing, with full speed ahead on QE3," said Jim O'Sullivan of High Frequency Economics.

At 2200 GMT, the euro was trading at 1,3564, compared with $1.3493 late Tuesday. The euro peaked at $1.3583 during the day.

The yen weakened further, meanwhile. The dollar pushed to 91.05 yen from 90.72 yen, while the euro moved to 123.54 yen from 122.42.

The yen's fall came "as Prime Minister Shinzo Abe continues to threaten the Bank of Japan's independence," said David Song of DailyFX.

"Indeed, Mr. Abe continued to float the idea of changing the central bank's mandate in order to quickly achieve the two percent target for inflation, and the BoJ may come under increased pressure over the near-term as the new government looks to target the local currency."

The British pound was marginally changed at $1.5798, while the dollar slipped to 0.9107 Swiss francs from 0.9212 francs late Tuesday.