The dollar fell to a three-month low on the euro today as markets expected the greenback to fall further to correct the US current account gap, with European policymakers were unlikely to stand in its way.
The dollar suffered a late New York sell-off after comments from European Central Bank chief Mr Wim Duisenberg that a dollar fall was unavoidable. Its losses mounted on Tuesday, bringing its fall to around 2 per cent in 24 hours.
The dollar lost momentum yesterday as no new economic data followed through on a surprise rise in US non-farm payrolls data last Friday.
Group of Seven policymakers said two weeks ago that more currency flexibility was needed to correct global imbalances, that is the ballooning US current account deficit. The market took the call to be aimed particularly at Japan and China.
Japan has been actively curbing yen appreciation against the dollar, including one bout of yen selling intervention conducted through the New York Federal Reserve last week.
Ministry of Finance data early on Tuesday showed Japan's foreign reserves rose to $604.873 billion at the end of September from $555.088 billion at the end of August - a result of the ministry's huge intervention during the month.
The ministry said last week that it had conducted 4.46 trillion yen ($40.18 billion) of intervention in the month to September 26th, bringing the year-to-date total to around 13.5 trillion yen - already a record for a calendar year.