The US dollar dropped to its lowest this year against a basket of currencies on Thursday, driving the Australian dollar up near parity as expectations of US easing kept investors piling on bets against the greenback. The Australian dollar, which boasts the highest yield among major currencies, soared to a 28-year peak at $0.9983 as investors continued to dump the greenback, expecting the Federal Reserve to start further money-printing next month.
The catalyst for the latest leg down was a move by Singapore to widened the trading band of the Singapore dollar, which hit a new record high, and a clear break by the euro through $1.4000, which triggered buy orders and drew model accounts into the fray.
The dollar index, which tumbled to its weakest since December at 76.465, is now on course for a test of trendline support at 75.95, with its November low of 74.17 then not far away. The euro, which surged close to $1.4100, now has resistance at $1.4195-1.4220 in its sights.
"The dollar's declining trend is intact. As the Fed will flood the markets with dollar cash, the dollar is weakening while funds are flowing to shares and any other asset markets," said Tsutomu Soma, senior manager of foreign securities at Okasan Securities.
The dollar also hit the latest in a succession of record lows against the Swiss franc and slid to parity with the Canadian dollar, a level noot seen since April this year The dollar index fell 0.6 percent on the day to 76.520 after breaching its January low at 76.60. The 75.95 target is the trendline from two major lows in July 2008 and in November 2009.
The euro jumped 0.8 percent to $1.4080, after rising as far as $1.4095, its highest in more than eight months. After failing to crack $1.40 the previous session, its move caught some players who had been expecting more consolidation by surprise as it triggered stops around $1.4030 and then $1.4050.
The Australian dollar, with its high yield and the economy's link to commodities, advanced as many traders saw a rise to parity with the US dollar as just a matter of time. It rose more than 0.7 percent to $0.9983, its highest in 28 years, bringing its year-to-date gains to 11.3 percent. It has risen 23.8 percent from a low in May.