The dollar fell on Wednesday, as traders ignored fairly robust US economic reports and instead focused on the currency's long-term negatives, sending the currency to a record low against the euro. In thin, late New York trade, the euro surged to a new record high around $1.3360, according to Reuters data. Some traders cited options barriers that may have been broken around $1.3350. The biggest weight on the dollar remains the wide US trade gap.
Earlier in the session, San Francisco Federal Reserve President Janet Yellen said that oil prices, business investment and the trade gap were all drags on the economy.
She added that the easy stance of Federal Reserve monetary policy will have to diminish as the economy picks up steam, appearing to support market expectations that the US central bank is likely to raise interest rates again at its next policy meeting on December 14.
The US currency failed to benefit from a stronger-than-expected US manufacturing report, sagging to a 12-year low against sterling but holding above new lows against the euro touched overnight.
The pound boosted by strong UK manufacturing data, surged more than 1 percent to around $1.9357, according to Reuters data, its highest since before Britain was ejected from Europe's Exchange Rate Mechanism in 1992.
"When you look at today's healthy ISM manufacturing data along with the beige book indicating bubbling inflation pressures, this will keep the Fed on course for higher rates," said Paresh Upadhyaya, portfolio manager with Putnam Investments in Boston.
The dollar hardly budged after the Fed's beige book report said economic conditions were improving in a number of regions from mid-October to mid-November, but that consumer spending was uneven.
The prospect of higher rates potentially burnishing the allure of US assets to foreign investors "is not as potent as it was for the better part of this year" in supporting the dollar, Upadhyaya said. That is because of the weight on the currency from the widening US current account deficit and the perception in the currency market of a de facto policy of benign neglect toward the dollar from US policy-makers, he said.
Late afternoon in New York, the euro was at $1.3351, up 0.5 percent in the session. Against the yen, the dollar was down at 102.50 yen, up from last week's 4-1/2-year low of about 102.15 yen.
Against the Swiss franc, the dollar was down about 0.1 percent at 1.1385 francs.
Gold rose to a 16-year high above $455 per ounce as investors bought the hard asset amid deepening worries about the falling dollar.
Earlier, the dollar fleetingly ticked higher after the Institute for Supply Management reported that its factory activity index rose to 57.8 in November from 56.8 in October. Economists had expected a reading of 57.0.
But the dollar quickly relinquished those minor gains.
"We have been shrugging off relatively good numbers for the dollar on a regular basis for the past month or so and focusing on the negative," said John Beerling, regional foreign exchange trading desk manager with Wells Fargo in Minneapolis.
Treasury debt prices fell after the ISM report. A gain in the employment component stoked speculation that November payrolls on Friday would show another healthy rise in jobs.