The US dollar hit a 14-month low against a basket of currencies on Thursday as growing optimism of a burgeoning economic recovery prompted demand for riskier assets at the expense of the safe-haven greenback.
The euro also rose after European Central Bank President Jean-Claude Trichet stuck to his standard message that US support for a strong dollar was important, disappointing traders who had expected a more forceful statement.
Trichet's comments came after the ECB held interest rates steady at a record low 1.0 percent. He also said the euro zone economy is stabilising, but cautioned against hopes of a speedy recovery, saying current interest rates were suitable for the economic situation.
"Obviously euro strength is concerning for them, so Trichet reiterated that a strong dollar policy is important, but that wasn't too much of a surprise," said Brian Kim, currency strategist with UBS in Stamford, Connecticut.
Traders said several Asian central banks bought dollars to slow the currency's slide. The ICE Futures US dollar index, a measure of the greenback against six major currencies, fell as low as 75.767, the lowest level since August 2008. It was last down 0.7 percent at 75.971. Traders said 74.30 is a breakout level for the index that could spark further weakness in the dollar. A breach of that level would target 71.30, followed by the index's all-time low around 70.70, set in March 2008.
The euro was up 0.6 percent at $1.4777, after hitting a session high of $1.4817, according to Reuters data, the highest level in two weeks. Against the yen, the dollar was down 0.2 percent at 88.45 yen. Wednesday's eight-month low of 88.01 yen was the most immediate target and a break below that would bring January's 13-year low of 87.10 yen into view as traders test how far and fast Japan's Ministry of Finance will let the currency strengthen.
Australia reported 40,600 jobs were created in September, confounding expectations of a drop and pushing the Aussie to a 14-month high against the US currency as markets anticipated more interest rate hikes this year. The Australian dollar jumped 1.6 percent to US $0.9054. Earlier this week Australia became the first Group of 20 economy to raise rates coming out of the financial crisis.