Dollar slides in New York

The US dollar fell on Tuesday on hopes the Federal Reserve will ease policy further to stimulate a flagging US economy, while better-than-expected German and Chinese factory data tempered worries about global growth. Fed Chairman Ben Bernanke will speak at the central bank's annual retreat in Wyoming on Friday. At last year's speech, he prepared markets for a $600 billion bond-buying program.
Such measures increase the amount of dollars in the system, driving down the currency's value, which helps US exports, and prompting investors to seek higher returns elsewhere. US stocks, under pressure since late July, rallied on Tuesday. "There is growing expectation, or rather hope," that Bernanke's speech "may contain some reference to a potential third round of quantitative easing," said Samarjit Shankar, managing director of global FX strategy at BNY Mellon in Boston.
The euro last traded up 0.6 percent at $1.4443 after climbing as high as $1.45 on trading platform EBS, the top of a tight $1.40-$1.45 range that has held firm since early July. Europe's debt and banking crisis has had some investors wondering whether the European Central Bank will soon have to adopt some monetary easing of its own, but a solid German manufacturing index eased some of those fears.
Commodity-linked, growth-sensitive currencies such as the Australian and New Zealand dollars gained ground. The Australian dollar rose 1.2 percent to $1.0518. Strong Australian-Chinese trade links make the Aussie sensitive to Chinese economic data. The New Zealand dollar jumped 1.3 percent to $0.8344.
Investors remained wary that the Swiss National Bank could re-enter markets to curb recent franc strength. The euro climbed as high as 1.1430 francs earlier and was last up 0.7 percent at 1.1431 francs. The SNB has cut interest rates to zero, flooded the banking system with francs and intervened in the forward market to make returns on francs less attractive to potential investors.
In the options market, implied volatility in euro/Swiss dipped below 18 percent from 20 percent on Monday as tighter ranges in spot suggested the recent SNB measures were taking effect. Against the yen, the dollar dipped 0.2 percent to 76.68 yen, although market players remained wary of yen-selling intervention by Japanese authorities.
Bank of Japan data suggested Japan sold roughly 4.5 trillion yen in currency intervention on August 4, its biggest one-day yen-selling intervention ever. But the yen ended up rising back to levels seen before intervention a few days later, thanks largely to hedge fund buying, said Citigroup analyst Todd Elmer in New York. A strong earthquake that struck the US East Coast on Tuesday afternoon and was felt as far away as Canada had little impact on the currency market.