The dollar fell against the euro but rose to a two-week high against the yen this afternoon as investors bet the worst is past for the recession-hit global economy.
Risk appetite has been boosted worldwide by recent economic data and a note of optimism from the US Federal Reserve this week.
Currencies regarded as higher risk such as the Australian dollar benefited strongly, and a rise in US stock futures also helped sentiment.
Trading was thin and relatively volatile, however, with most European markets closed due to the May Day holiday.
“As global equities recover and more optimistic economic indicators roll out, more people will say get into equities before others and as that happens they will move out of low-risk assets,” said Sacha Tihanyi, currency strategist at Scotia Capital in Toronto.
In early New York trade, the dollar gained 0.8 per cent to 99.33 yen, having hit a two-week high around 99.58 yen, while the euro rose 1.3 per cent against the yen to 132.01 yen, after also touching a two-week high of 132.35 yen.
The euro rose 0.5 per cent against the dollar to $1.3294.
The Australian dollar jumped 0.9 per cent against the dollar to $0.7319 and by 1.8 per cent against the yen to 72.74 yen after earlier hitting a two-week high around 72.96 yen.
The New Zealand dollar rose 1.2 per cent against the dollar to $0.5716, while the Canadian dollar was also firmer, with the US dollar down 0.7 per cent at C$1.1855.
Investors were encouraged by data overnight showing that Chinese manufacturing gained further momentum in April as well as by today's better-than-expected UK manufacturing survey.
Reuters