By: Hillel Fuld
The USD declined to a low of several months vs commodity-based currencies and the EUR, as comments by policymakers confirmed the opinions that the U.S. interest rates would remain lower for a more extended period of time than those belonging to other large countries.
The greenback hit a low of 14-month vs. the EUR as well as the higher-yielding AUD. It also hit a 15-month low point against the New Zealand and Canada dollars.
The USD touched a 3 week low vs the sterling as well, after a Bank of England policymaker stated that its quantitative easing program was effective. Traders received a green light after their expectations that the US interest rates would remain low for an extended period of time were confirmed by the latest meeting of the US Federal Reserve policy setting committee.
Meanwhile risk sentiment increased by JPMorgan (JPM.N)’s forecast beating earnings as well as Intel Corp INT.O’s positive numbers this week. Both boosted equities and dimmed the dollar's appeal.
Traders are paying close attention to Goldman Sachs (GS.N) and Citigroup (C.N), as well as other earnings due out on Thursday. Increasing numbers in Asia and Wall St. led to an increase in European share prices. "Firmer equity markets and lower risk aversion continue to depress the dollar," said Adam Cole, global head of FX strategy at RBC Capital Markets.
Technical analysts are looking at a $1.5 break with caution after seeing 14-month high of $1.4967 for the EUR. At 0738 GMT, it was up 0.1 percent at $1.4940. Sources close to the Eurogroup of euro zone finance ministers stated on Wednesday that they were going to discuss exchange rates at a meeting on Monday, with more concern about the EUR showing future rises than its current rates.
European Central Bank President Jean-Claude Trichet is due to speak at a conference later on today, and "forex markets obviously (are) attuned to any mention of euro strength as a cause for concern," RBC's Cole said.
The EUR’s strength might be a result of emerging economies trying to diversify their foreign reserves. In order to prevent their currencies from experiencing sharp rises, banks have been buying dollars but then immediately selling the USD for euro, traders explained. The dollar index, which aggregates the statistics of the greenback versus a variety of six other majors, was down 0.2 percent at 75.332 after falling to a 14-month low of 75.211 .DXY.