The dollar fell to a 15-month low against a basket of currencies on Monday and the euro rose above $1.50 after the Group of 20 pledged to keep emergency stimulus spending in place until global recovery is assured. The G20's action suggested global interest rates would stay low, giving investors a plentiful supply of cheap money with which to buy stocks, oil, gold and high-yielding currencies.
US interest rates are expected to remain near zero well into 2010, and analysts said that would keep the dollar weak as market players borrow it cheaply to finance other investments. An index of the dollar against six major currencies fell to its lowest level since August 2008 and was on track for its biggest single-day decline in more than three months.
"There's no risk of the Fed tightening in the near term, so the dollar is going to get weaker," said Jay Meisler, principal of Global-View.com, an online forum for investors and traders. The euro was last up 1 percent at $1.4992. Earlier it reached $1.5020, near its 2009 high of $1.5061. Sterling rose 0.8 percent to $1.6751 while the dollar fell 1.7 percent against the Canadian dollar to C$1.0564. The dollar rose 0.1 percent to 89.99 yen, while the Australian dollar rose 1.2 percent to $0.9296.
Ministers from the G20 developed and developing countries did not dwell on exchange rates at a weekend meeting, giving investors a green light to sell the dollar. Analysts said US authorities will want rates to remain low after data last week showed the US jobless rate rose to a fresh 26-year high of 10.2 percent in October.
"The focus is on jobs and the economy now, and the United States is not going to defend the dollar as long as its decline stays orderly," Meisler said. "They will pay attention if it starts affecting the bond market, but right now, a weak dollar is helping the stock market."
The government has not had much trouble selling debt so far. Demand was high on Monday in a $40 billion auction of three-year notes, the first leg of this week's record $81 billion refunding that will include 10- and 30-year sales. The ratio of bids received to those accepted was the highest since November 1990, with indirect bids, a proxy for foreign demand, accounting for more than 68 percent.
Dealers also cited an International Monetary Fund report as weighing on the dollar. The report noted while the dollar had depreciated in recent months, it still remained on the "strong" side. Even sterling hit a three-month peak against the greenback on Monday despite an emergency Bank of England program that has poured hundreds of billions into the UK economy, partly through purchases of government debt.