NEW YORK (MarketWatch) -- The dollar rose firmly against major counterparts on Wednesday, with crude-oil prices falling back from record levels near $120 a barrel giving some respite to the U.S. currency.

In recent action, the dollar index, which measures the U.S. unit against a basket of major currencies, was up 0.7% at 71.84.

Crude oil was recently down $1.84, or 1.5%, to $117.53 a barrel, after news of a rise in U.S. inventories led a retreat from Tuesday's record level of $119.90. See Futures Movers.

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Crude oil and the dollar often have an inverse correlation with each other. With crude oil priced in dollars, a drop in the U.S. currency makes a barrel of oil cheaper for holders of other currencies.

With the dollar rising overall, the euro retreated further against the U.S. unit after reaching a record high of $1.6018 on Tuesday. In recent action, the euro stood at $1.5902, down from $1.5994 in late trade Tuesday.

"Unlike previous cases when the euro broke through higher on improved fundamentals in Europe, the $1.60 level was taken because of oil," said Ashraf Laidi, currency strategist at CMC Markets.
The key IFO business survey from Germany, to be released on Thursday, will be "a big test" for the euro, Laidi said. "That survey has historically been the key dynamic that determined the euro's moves higher," he said.

The euro did receive some support earlier after the RBS/NTC flash euro-zone composite purchasing managers index rose to 51.9 in April, up from a reading of 51.8 in March and defying expectations for a decline to 51.5.

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