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The US dollar fell to its lowest level in nearly a year against the euro on Thursday as higher stock prices this week and mostly positive economic data dampened safe-haven demand for the US currency. Optimism about a global recovery grew after a report showed factory activity in the US Mid-Atlantic region rose in September to its highest since June 2007, while separate data suggested improvement in the housing and job sectors too.
The increasing appetite of investors for risky assets pushed the low-yielding dollar to fresh near-one-year lows versus the euro and a basket of currencies. Trading was volatile as US stocks seesawed between gains and losses. In late New York trading, the euro rose as high as $1.4766, its highest since late September 2008, according to Reuters data. It was last up 0.2 percent at $1.4738.
Investors have sold the dollar heavily this month as recovery hopes diminished safe-haven demand. The prospect of low US yields and concerns about the US fiscal deficit fuelled the dollar selling. The ICE Futures US dollar index, which tracks the value of the greenback versus a basket of six other major currencies, hit a near one-year low of 76.010, before recovering to trade little changed at 76.225. The index has fallen 2.4 percent in September, its worst monthly performance since May.
The Philadelphia Federal Reserve Bank's business activity index jumped to 14.1 in September from 4.2 in August. Separately, groundbreaking for US homes and permits for future building scaled a nine-month high in August. The number of people filing new claims for jobless benefits fell last week.
Investors are not just selling dollars as risk appetite rises but also yen, analysts say, particularly against the higher-yielding commodity currencies. The euro gained 0.5 percent to 134.31 yen and the dollar was up 0.3 percent at 91.11 yen. The yen got an early boost after Bank of Japan Governor Masaaki Shirakawa said a stronger yen would push down prices in the near term but might support the economy in the longer run.
Speaking after the BOJ held interest rates at 0.1 percent while upgrading its economic assessment, he added he would carefully monitor the impact of currency moves. In other trading, the Swiss franc hit its highest in more than one year at 1.0271. The Swiss National Bank renewed its policy of ultra-low interest rates, bond purchases and interventions to stop the Swiss franc rising.

Copyright Reuters, 2009

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