The US dollar fell to a more than 15-month low against a basket of six currencies on Wednesday a day after the Federal Reserve indicated the greenback's decline was orderly and that US interest rates would remain low for some time. The euro broke above $1.51 and saw its biggest one-day rise in nearly four months, while the yen rallied to a 10-month peak against the dollar.
Light trading volumes ahead of the US Thanksgiving holiday on Thursday may have exacerbated currency moves. Data suggesting stabilisation in the US labour and housing markets helped boost US stock prices and risk appetite in general, denting safe-haven demand for the dollar and lifted higher-yielding currencies such as the Australian dollar.
Minutes from the Federal Reserve's last policy meeting released on Tuesday said the dollar's recent drop has been "orderly," although policymakers said any tendency for dollar declines to intensify or to put significant pressure on inflation would "bear close watching." The ICE Futures dollar index, which measures the greenback's performance against a basket of six currencies, fell to 74.227, the lowest level since early August, 2008. It last traded at 74.241, down 1.1 percent on the day.
The euro rose 1.2 percent to $1.5136 after hitting a more than 15-month high at $1.5144, according to Reuters data. At current prices, the euro is on track for its best day since the end of July. The euro is overvalued against the dollar and too late an exit from euro zone fiscal stimulus could make it even stronger, the International Monetary Fund is likely to say on Tuesday, euro zone sources said.
Traders said dollar losses accelerated after Russia's central bank said it would use part of its reserves to purchase Canadian dollars, underlining moves by central banks to diversify out of the US currency. The dollar fell 1.4 percent to 87.34 yen after falling as low as 87.22 yen, its lowest since January. US consumer spending and home sales rose more than expected in October, while new claims for jobless benefits fell sharply last week, suggesting the economic recovery was gaining traction.
The Australian dollar rallied 1.4 percent to US $0.9318 after bullish comments from Australia's central bank raised speculation of a rate hike next month. The Swiss franc broke parity against the US dollar, which was last down 1.3 percent at 0.9962 franc. Against the Canadian currency, the US dollar fell 1.3 percent to C$1.045.