The dollar hit a four-month low against a basket of currencies and a seven-week trough versus the euro this morning, facing renewed selling amid a recovery in risk appetite that has curbed safe-haven buying of dollars.
Traders said the dollar also came under pressure due to an article in the Financial Times that touched on the risk of the United States losing its triple-A credit rating and refocused attention on rising US debt issuance.
While the content of the FT opinion piece was unsurprising it added to pressure on the dollar, which was already looking vulnerable on technical charts, traders said.
“I think the market overall wanted to test the (dollar's) downside and the FT story linked well with that trend," said a trader for a Japanese trust bank.
The recent recovery in risk appetite and falls in dollar funding costs point to a decline in market players' demand for dollars, leaving the US currency vulnerable, said Takahide Nagasaki, chief foreign exchange strategist for Daiwa Securities SMBC.
"Concerns related to dollar funding have receded somewhat, and the focus turned towards topics that are negative for the United States such as the fiscal deficit," Nagasaki said.
The dollar index, which measures its performance against a basket of six currencies, hit a four-month low of 81.871. After trimming some losses, it was down 0.2 per cent on the day at 82.140.
Last week, the dollar index breached support at the 200-day moving average while the euro broke above a similar moving average against the dollar.
In addition, the dollar breached key support against the yen earlier this week, when it fell below the top of the cloud on daily Ichimoku charts.
The euro hit a seven-week high of $1.3722 on trading platform EBS, but after shedding some gains it was up 0.2 per cent from late US trading yesterday at $1.3674.
Reflecting a gradual return in confidence in money markets, the three-month dollar London interbank offered rate (Libor) marked a record low of 0.906 per cent on yesterday.
Sterling and the Australian dollar also renewed their push higher against both the greenback and the yen.
The dollar hit a four-month low of 1.0977 Swiss francs on EBS and came under early selling pressure against the yen after Japan's opposition finance spokesman said in comments to the BBC that Japan should avoid buying US government bonds denominated in dollars because of currency risk.
Reuters