The dollar struggled on Wednesday to recover from a five-month low against major currencies, as concerns about the U.S. economy eased, given President Donald Trump's unpredictable trade policies.

The euro held near a five-month high on growing optimism that the war in Ukraine would end.

The Canadian dollar steadied after a volatile session on Tuesday, when Trump vowed to double tariffs on steel and aluminum to 50%, only to reverse course hours later.

The Bank of Canada decides policy on Wednesday, with traders expecting another quarter-point rate cut.

"Trade uncertainty continues to persist and so does market volatility," said Kyle Rodda, senior financial markets analyst at Capital.com.

"The outlook for U.S. growth continues to deteriorate," Rodda added, pointing to increased attention on the consumer price index (CPI) release later in the day, which he warned "could be a source of significant volatility." The U.S. dollar index, which measures the greenback against a basket of six major peers, edged up 0.08% to 103.53 in Asian trading hours, following a 0.46% drop on Tuesday that saw it hit a low of 103.21 for the first time since Oct. 16.

A string of weaker U.S. economic data continued on Tuesday with small business confidence falling for a third straight month in February.

Investors have been on edge since Trump avoided ruling out the possibility of a recession due to his trade policies in an interview on Sunday with Fox News.

Wednesday's CPI report may be setting markets up for a "lose-lose situation," said Julien Lafargue, chief market strategist at Barclays Private Bank.

"A higher-than-expected reading could fuel the stagnation narrative while a weaker-than-expected reading could reinforce recession fears," Lafargue said.

"What markets really need right now is better visibility on growth rather than inflation." The euro weakened 0.13% to $1.0905, but held near the previous session's peak of $1.0947, its highest since Oct. 11. Ukraine said on Tuesday it would accept a U.S. proposal for an immediate 30-day ceasefire in its conflict with Russia. The single European currency had already been buoyed by Germany's pledge to block the plan, although the situation became more complicated after the Greens vowed to block the plan and unveiled a rival proposal. Sterling dipped 0.13% to $1.2931, following Tuesday's 0.53% rally. The dollar rose 0.14% to 147.99 yen, after falling to a five-month trough of 146.545 yen in the previous session. The greenback was steady at C$1.4444, after fluctuating between a 0.5% gain and a 0.4% loss on Tuesday.

The dollar rose 0.1% to 7.2335 yuan in offshore trade.

Cryptocurrency bitcoin edged down 1.4% to $81,661 after rebounding from a four-month low of $76,666.98 on Tuesday.

"Risk assets continue to slide on Trump's tariff noise and now his recession talk, (and) digital assets are not immune," said Geoffrey Kendrick, global head of digital asset research at Standard Chartered Bank.

A break below key technical resistance at $76,500 would pave the way for a quick drop to $69,000, Kendrick said, although he maintained his forecast for a rally to a record $200,000 by year-end. (Newsmaker23)

Source: Reuters