The dollar fell on Wednesday to a record low against a trade-weighted basket of major currencies tracked by the Federal Reserve, reflecting prospects for slower US growth relative to other economies.
Earlier in the day, the dollar dropped to within a whisker of its record low against the euro after softer-than-expected US housing data contrasted with healthier economic signs out of Europe, including a strong reading on business sentiment in the euro zone.
The greenback slid after a report showed sales of US new homes rose 2.6 percent in March but fell short of the pace expected by analysts. The news came a day after data showing the biggest monthly drop in sales of existing homes in 18 years, fueling expectations the Fed may soon cut interest rates.
"A lot of this has to do with strength overseas so interest rates abroad are trending higher while ours have levelled off and are expected to go lower," which weighs on the dollar, said Jack Ablin, chief investment officer with Harris Private Bank in Chicago.
The dollar's decline pushed the euro to as high as $1.3667, near the currency's all-time peak at $1.3670, according to electronic platform EBS. By early afternoon, it settled at $1.3637, nearly unchanged on the day.
The Federal Reserve's trade-weighted index of the dollar's value against a basket of seven currencies declined to the lowest reading in the 34-year history of gauge, to 78.99 from 79.24 on Tuesday.
The dollar has weakened considerably in the past year, falling to 26-year lows against sterling and nearing record lows against the euro, mainly because of slowing US economic growth at a time when other major economies are still showing signs of robustness.
The spread of benchmark 10-year US Treasury yields over euro zone paper with the same maturity this week touched 45 basis points, the narrowest since November 2004. The primary reason for the dollar's 3 percent decline against the euro this year has been the gradual disappearance of support provided to the dollar by higher US Treasury yields.
"At the end of the day, this data is just weighing on interest rates, so key interest rate spreads continue to compress and that is going to weigh on the dollar near term," said David Mozina, foreign exchange strategist with Lehman Brothers in New York.
The Beige Book, the Fed's anecdotal look at the US economy, released on Wednesday, said most regions showed only modest or moderate growth in recent months, with a decrease in home building and tepid demand for mortgages.
The next focus for the market will likely be data for first-quarter US gross domestic product released on Friday. Slower-than-expected GDP growth along with tame inflation could be a recipe for more dollar weakness.
"Overall, it looks like we're going to see a little more weakness in the dollar as the market prices in the potential for more aggressive Fed cuts," said Camilla Sutton, senior currency strategist at Scotia Capital in Toronto.
Against the yen, the dollar edged up 0.1 percent to trade at 118.65. One of the biggest movers on the day was the Canadian dollar, which rose to its highest since late September. The US dollar fell 0.6 percent to C$1.1147.