Dollar hits 3-year low, may slide towards all-time low
TOKYO |
(Reuters) - The dollar struck its lowest in almost three years against a basket of currencies on Thursday, with market players selling the greenback to buy buoyant risky assets in a move that threatens to drive the dollar index toward its all-time low.
The dollar has taken a hit in the past few days as investors have flocked back to higher-yielding currencies, commodities and equities after a brief shake-out earlier in the week.
The chart outlook for the dollar is looking dire after it tumbled through the 74.17 low touched in November 2009, a move that may spark a run toward the 70.698 all-time low hit in 2008.
Investors have rushed into risky assets due to strong U.S. corporate earnings and signs the global economy is chugging along even as the Federal Reserve stays very cautious about when it will start to unwind its super-loose policy.
"Our central scenario remains for continuing global recovery, which should prove supportive environment for commodity and high-beta G10 currencies," said FX analysts at Citigroup in a note to clients, referring to currencies such as the Aussie and Norwegian crown.
A series of records have been broken this week, with gold vaulting to all-time highs above $1,500 an ounce and the Aussie powering to peaks above $1.07 -- a level not seen since the currency became free-floating in the early 1980s.
The dollar has suffered the most against commodity-linked currencies such as the Australian and Canadian dollars, as well as emerging markets currencies such as the Singapore dollar as authorities in Asia allow more currency strength to fight inflation.
But Asian authorities have also regularly intervened to buy dollars to limit the gains in their currencies. Traders say a portion of those dollar purchases are typically shifted into the euro and other currencies, creating a vicious circle that drags the dollar lower.
The euro has pushed to 15-month peaks but has lagged the broader move due to the ongoing worries about the euro zone crisis, underscored this week by reports that Greece may restructure its debt in coming months.
A solid auction of Spanish debt the previous day helped provide some reassurance that the problems plaguing Greece, Ireland and Portugal would not spread to the country seen as the next most vulnerable in the euro zone.
The dollar index fell 0.3 percent to 74.182 .DXY and touched a low of 74.116, the lowest since August 2008 -- just before it surged during the Lehman Brothers collapse as investors rushed for safe-havens during the financial crisis.
The euro was up 0.3 percent at $1.4560 after jumping to a 15-month peak of $1.4575 after an option barrier at $1.4550, which had blocked its advance last week, was finally taken out.
The single currency also appears to be poised for further gains on the charts. A break of the January 2010 high at $1.4583 would open the way for a run at the 2009 peak at $1.5145.
The Australian dollar was up 0.3 percent at $1.0728 after pushing as high as $1.0740 on Thomson Reuters Matching, with some traders citing talk of an option barrier at $1.0750 that may block further gains in the near term.
The dollar dipped 0.2 percent against the yen to 82.30 yen, falling back toward the 82.00 level that is seen as a key level of chart support because it marks the intraday high reached on March 18 when the G7 intervened to sell the yen.
The yen has also slid broadly with the dollar as the Bank of Japan has flooded the banking system with money and expanded its asset purchases after the quake and tsunami struck the country last month.
Trading activity may start to slow before the long Easter weekend in many parts of the world. Trading desks in London and Hong Kong will be shut both Friday and Monday, while Sydney markets will be closed until next Wednesday.
(Additional reporting by Reuters FX analyst Rick Lloyd and Masayuki Kitano in Singapore, Yoshiko Mori in Tokyo)
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