- Increase in risk appetite hurts dollar
- Kiwi dips but then erases losses after RBNZ decision
- Powell emphasises low rates here to stay
The dollar slipped to a three-year low against the British pound and fell against commodities currencies on Wednesday as investors increased bets that a global economic recovery will boost riskier assets.
The New Zealand dollar briefly fell but then quickly stabilised after the country's central bank kept monetary policy on hold and said inflation and employment will remain below its targets in the medium term.
U.S. Federal Reserve Chair Jerome Powell reiterated on Tuesday that interest rates will remain low and the Fed will keep buying bonds to support the U.S. economy, which many traders say is a long-term negative factor for the dollar.
At the same time, more money is flowing toward currencies that are expected to benefit from a pick-up in global trade and to countries that are bouncing back quickly from the coronavirus pandemic, which is also weighing on the dollar.
"Signs of economic recovery are lifting commodities prices, which in turn supports currencies of commodities exporters," said Junichi Ishikawa, foreign exchange strategist at IG Securities.
"Risk appetite has improved a lot, and this leaves the dollar at a big disadvantage."
The British pound GBP=D3 rose to $1.4170, the highest since April 2018.
The outlook for sterling has brightened as investors cheer Britain's rapid coronavirus vaccination programme and its plans to ease lockdown restrictions on economic activity.
The New Zealand dollar NZD=D3 edged up to $0.7367, close to a three-year high.
The Reserve Bank of New Zealand expressed some caution about the outlook, which may have disappointed some traders who expected central bankers to acknowledge a recent improvement in economic data.
The Australian dollar AUD=D3 , which tends to benefits from rising metal and energy prices, jumped to a three-year high of $0.7945.
Against the euro EUR=D3 , the dollar traded at $1.2158, close to a six-week low.
The dollar managed to rise to 105.40 Japanese yen JPY=D3 and hit an almost three-month high against the Swiss franc CHF=D3 , but overall sentiment was still negative on the greenback.
Powell pushed back against suggestions that loose monetary policy will lead to runaway inflation and financial bubbles, which have emerged as two important themes this year, because there is growing scepticism about the rapid pace of gains in global stocks.
For economies that have limited disruptions caused by the coronavirus outbreak, their central bankers now face questions of when to start tightening policy, which makes the dollar look less attractive, some analysts say.
The dollar index =USD against a basket of six major currencies fell to 90.025.
In the cryptocurrency market, bitcoin BTH=BTSP halted its plunge from a record high above $50,000 and stabilised at $49,052. Square Inc SQ.N has invested $170 million in the digital asset, but some analysts still argue that bitcoin's recent surge was excessive.
Rival digital currency ether ETH=BTSP recovered from a sharp sell-off to trade up slightly at $1,591.
======================================================== Currency bid prices at 0129 GMTDescription RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR=EBS $1.2158 $1.2150 +0.07% -0.49% +1.2164 +1.2143 Dollar/Yen JPY=D3 105.4000 105.2600 +0.21% +2.13% +105.4800 +105.2400 Euro/Yen EURJPY= 128.15 127.86 +0.23% +0.97% +128.2300 +127.7800 Dollar/Swiss CHF=EBS 0.9058 0.9054 +0.06% +2.40% +0.9064 +0.9048 Sterling/Dollar GBP=D3 1.4190 1.4112 +0.55% +3.86% +1.4235 +1.4111 Dollar/Canadian CAD=D3 1.2569 1.2590 -0.16% -1.29% +1.2596 +1.2560 Aussie/Dollar AUD=D3 0.7938 0.7909 +0.37% +3.19% +0.7945 +0.7903 NZ NZD=D3 0.7367 0.7343 +0.33% +2.59% +0.7377 +0.7317 Dollar/DollarAll spots FX= Tokyo spots AFX= Europe spots EFX= Volatilities FXVOL= Tokyo Forex market info from BOJ TKYFX
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