The dollar fell to new lows against a range of currencies yesterday as the combination of European and Asian holidays led to thin markets, emboldening momentum traders looking to test the market's mood.
"Structural concerns relating to global imbalances, reserve diversification and policymaker views on the dollar continue to dominate price action," said Daniel Katzive, currency strategist at UBS.
Treasury secretary John Snow last week reiterated the Bush administration's "strong dollar" policy but did not comment directly on the dollar's recent fall.
"[ That] is the same thing as saying "you can sell the dollar all you want without fear of the US intervening," said Barbara Rockefeller, of Rockefeller Treasury Services, a Connecticut-based currency management group.
Strong US data yesterday helped lift the dollar off its lows but did little to change the overall mood. The greenback plunged to its lowest level for a year against the euro, hitting a low of $1.2690, before recovering to $1.2612. Against the Japanese yen, it hit a seven-month low at Y112.35 but recovered to Y113.11, down 1 per cent.
Nymex crude oil prices climbed above $72 a barrel as a weekend fire at a refinery in Italy added to concerns about possible supply disruption in Iran and Nigeria.
On Wall Street, the Dow Jones Industrial Average closed up 0.21 per cent at 11,343.29, while the S&P 500 finished down 0.41 per cent at 1,305.18 . The Nasdaq Composite fell 17.78 to 2,304.79.
Stocks fell after CNBC television reported Federal Reserve chairman Ben Bernanke had said over the weekend that economic data would dictate the Fed's future action on interest rates.
CNBC cited Mr Bernanke as saying the Fed was "flexible, not dovish". This also triggered a sell-off on the bond market. - (Financial Times Service /Reuters)
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