The US dollar was on the run in Asia on Thursday after a ratings warning from Moody's and a hint of further policy easing from the Federal Reserve unleashed a wave of panic selling, much to the relief of the hard-pressed euro. As fiscal problems hurt not just the euro but also the dollar, traders looked to the Swiss franc as a likely safe haven for investors, boosting the currency to a record high against the dollar and the euro.
The New Zealand dollar was another stand-out performer, soaring to 30-year highs against the greenback after data showed the economy grew far faster than expected in the first quarter, reviving the chance of a rate hike before the year-end. That stood in stark contrast to the United States, where Fed Chairman Ben Bernanke had canvassed the idea of further quantitative easing should economic growth and inflation slow.
"Three months ago all the focus was on the exit from unconventional policy; now Bernanke mentions the conditional possibility of QE3," said Paul Meggyesi at J.P. Morgan. The dollar fell to its lowest level in a week against a basket of currencies, with the dollar index falling as low as 74.690, down 2.6 percent from a four-month peak hit just two days ago.
A fall below trendline support, which comes around the 74.40-45 area this week, could be taken as a sign that the dollar's gradual uptrend since early May has ended, opening the way for a new downtrend just as the Fed's two previous experiments with quantitative easing led to a constant decline in the dollar.
The US dollar slid to a fresh record low against the Swiss franc around 0.8080 francs, before stepping back up to around 0.8122 franc, which is still 0.8 percent below late US levels. The euro leaped to $1.4205 for a gain of 0.3 percent, having risen nearly 3 percent from a four-month low hit earlier in the week, when players were frightened by the spectre of the eurozone debt crisis hitting big economies such as Italy and Spain. But it hit another record low against the Swiss franc, dropping as low as 1.1494 franc before bouncing back to around 1.1550.
The dollar fell to a four-month low of 78.45 at one stage, just above a 76.4 percent retracement of its rally after joint intervention by the Group of Seven nations in March before spiking up about a full yen to around 79.60 yen, with traders citing heavy buying from a US bank.
Japanese Finance Minister Yoshihiko Noda earlier said the yen's rise does not reflect fundamentals but many traders doubt that Japan is ready to intervene to curb the yen's strength at this stage given that the move is driven largely be overall weakness in the dollar, rather than yen-specific factors. Elsewhere, the kiwi flew as high as $0.8508, a 30-year peak, on the strong reading in New Zealand's GDP. But it gave up much of the gains to last trade at $0.8417, up 0.1 percent on the day. The Aussie slipped 0.3 percent against the US dollar to $1.0720.