The dollar lost its footing on Monday and headed back to multi-month lows against commodity-related currencies, the euro and sterling as investor appetite for higher-yielding assets continued to recover.
Markets took in stride news that General Motors Corp (GM.N) would file for Chapter 11 bankruptcy protection later on Monday, with the move long expected. [ID:nCARS1]
On Friday the dollar hit a five-month low against a basket of currencies and the euro topped $1.41 for the first time this year as hopes for a global recovery got a boost from data showing the U.S. economy shrank less than expected in the first quarter. [ID:nN29399341]
Concern about the expanding amount of Treasury debt needed to fund a record U.S. budget deficit has also been putting pressure on the dollar just as signs that the economy may be through the worst have encouraged investors into riskier assets.
“The tone has not changed — risk positive and dollar weakness,” said Masafumi Yamamoto, head of FX strategy Japan at Royal Bank of Scotland in Tokyo.
“It seems that dollar-based hedge funds or U.S. investors are finally using the cash piled up during the risk aversion period.”
In China, Treasury Secretary Timothy Geithner pledged the U.S. administration was committed to cutting its huge deficits as quickly as it could. [ID:nSP428779]
The dollar fell 0.5 percent to 94.86 yen <JPY=>, edging back towards May’s two-month low of 93.85. Two traders said Japanese exporters had been selling dollars and one said foreign funds were also selling.
The greenback fell to its latest five-month low against a basket of six major currencies .DXY and struggled at a five-month low beyond $1.4165 per euro <EUR=> on trading platform EBS.
The euro and sterling gained 1.5 percent against the dollar on Friday while the Australian and New Zealand dollars charged more than 2 percent higher.
The Australian dollar, which hit a fresh eight-month peak of $0.8063 <AUD=D4> according to Reuters data, rose 0.5 percent to $0.8047 on Monday and the kiwi gained 0.3 percent to $0.6420 <NZD=D4> after hitting an eight-month peak of $0.6426.
Firm Australian retail sales for April gave the Aussie support and reinforced expectations that the central bank will hold interest rates steady at a record low of 3.0 percent at a policy meeting on Tuesday.
Sterling too was at its highest against the dollar since early November, climbing to $1.6245 <GBP=D4>.
The yen, which has also hit multi-month lows against the likes of sterling, the Aussie and euro in recent weeks, was slightly firmer on the day, helped by its gains against the dollar.
The euro was down 0.5 percent at 134.23 yen <EURJPY=R> while the Australian dollar shed 0.1 percent to 76.37 yen <AUDJPY=R>.
