Dollar falls broadly in New York

The dollar slipped broadly on Monday with investors positioning for the possibility the US Federal Reserve may suggest the need to inject more stimulus into the economy. The US central bank meets on Tuesday and the chance of more Fed quantitative easing - which may push benchmark yields lower, hurting the return of US dollar-assets - highlighted differences in policy among major central banks, as the Australian dollar hit a two-year high on hawkish Reserve Bank of Australia comments.
In late afternoon New York trade, the US currency was 0.1 percent lower against a currency basket at 81.314, after falling earlier to 81.046, near a five-week low of 80.865 hit last week. The Australian dollar rose more than 1 percent and touched as high as $0.9494, its strongest since mid-2008, after Reserve Bank of Australia Governor Glenn Stevens suggested Australian interest rates would rise further.
Gains were capped, however, with traders citing talk of a large option being defended just below $0.9500 with expiry at the end of the month. If the barrier is broken, traders are likely to quickly target the psychological $0.9500 level itself. The euro rose 0.1 percent to $1.3061 after climbing as high as $1.3120, helped by a rise in European shares, though sentiment toward the single currency was still dented by concerns about Ireland's finances.
Ireland's central bank said the country would need to rethink plans to cut a bloated budget deficit. The greenback traded in a tight range against the yen because of a market holiday in Japan and as investors were cautious of taking big yen positions after Japan's intervention last week to curb the strength of its currency. The dollar was 0.1 percent lower at 85.75 yen, keeping in the tight range since intervention pulled the US currency up from a 15-year low. Investors were focused on whether the dollar would break above 86.00 yen. However, strength in the Japanese currency may subside as speculators have cut bets that it will appreciate.
The latest Commodity Futures Trading Commission data shows net long yen positions fell to 47,642 as of last Tuesday, the day before Japan entered the market, from 52,183 the previous week. The cut was almost all in long positions, which slipped to 61,215 from 65,440. Short positions rose to 13,573 from 13,257.