LONDON, Nov 5 (Reuters) - The dollar inched up against a basket of currencies on Wednesday, supported by weaker European shares as fears of a recession kept risk appetite low, while a decisive win by Barack Obama to become the next U.S. president also bolstered the currency.
The U.S. currency recovered its footing after sliding roughly 2 percent on a trade-weighted basis on Tuesday, but gains were limited as a slide in dollar interbank lending rates showed that tensions in money markets were starting to subside, easing some demand for the currency.
The euro and sterling were pressured lower after dismal figures offered more evidence that their economies continue to weaken, adding to the argument for big interest rate cuts by the Bank of England and the European Central Bank on Thursday.
The dollar initially rallied on the announcement that Democrat senator Obama had won the presidency [ID:nN05502158], and analysts said that a big slump in the euro zone services sector and weak UK output data also helped to prop up the U.S. currency, which suffered steep losses in the previous session.
Dismal economic data pushed European shares 1.6 percent lower on Tuesday, and analysts said that demand for high-risk positions, including assets in euros, sterling and other high-yielding currencies, would remain low as evidence of a global recession continues to mount.
"If we keep getting bad economic data, it will get harder for equities to keep rallying," said Adarsh Sinha, currency strategist at Barclays Capital in London.
"And so it will become more difficult for the dollar and the yen to weaken."
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