The dollar tumbled broadly today after weak US economic data dragged the 10-year treasury yield down to a six-month low overnight, with the greenback's drop gaining steam on a flurry of stop-loss selling.
The dollar fell across the board, hitting a record low against the Swiss franc and a three-year low versus the New Zealand dollar, with traders citing talk of dollar selling by model funds and US banks, as well as Asian sovereign players.
The dollar also retreated against emerging Asian currencies such as the Singapore dollar, and slid 0.6 per cent versus a basket of major currencies to 75.107, pulling away from a two-month high of 76.366 hit earlier this week.
The dollar had rallied earlier in May after a rout in commodities such as silver and oil spooked investors, prompting them to unwind dollar-funded bets on risky assets.
"Market players had flocked to dollar buying, based on the view that the dollar tends to rise when investors are looking to avoid risk," said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo. "But I think the market got a bit too carried away with that theme."
The dollar hit a record low against the Swiss franc of 0.8534 francs on trading platform EBS, and was last down 1 per cent at 0.85740.
The New Zealand dollar marked a three-year high of $0.8200, coming within a whisker of a 26-year peak of $0.8215 hit in March 2008. It was last up 1.1 per cent at $0.8186.
The euro climbed 0.7 per cent to $1.4244, its rise having gained momentum after hitting stops above the previous day's high near $1.4207.
A drop in US Treasury yields yesterday dented the dollar, giving the single currency some respite from a recent sell-off on worries over the possibility of debt restructuring by Greece, which had sent the euro down to a two-month low of $1.3968 earlier this week.
"The dollar has been strong since the start of May but it looks like that outperformance may be coming to a close," said Junya Tanase, foreign exchange strategist at JPMorgan Chase in Tokyo. "Even if Greece's problems continue to weigh on the euro, if the dollar does not strengthen much, then the euro's downside against the dollar may gradually become limited."
The euro has turned higher after its drop this week stalled right near its 100-day moving average and also the bottom of the cloud on daily Ichimoku charts, a form of Japanese technical analysis popular among market players.
But one cloud hanging over the euro is mounting concern over whether Greece will receive its next round of aid from the IMF.
Comments yesterday by Jean-Claude Juncker, president of the Eurogroup finance ministers, raised concerns that Greece may not get the next €12 billion in aid from the International Monetary Fund that is needed to cover immediate funding needs.
The dollar retreated after data yesterday showed fresh signs of a slowdown in the US labour market and the second estimate of first quarter US growth came in below forecasts, spurring a decline in the 10-year Treasury yield to a six-month low.
Reuters
