MW: Dollar tumbles amid reserve doubts, as risk appetite returns
NEW YORK (MarketWatch) -- The U.S. dollar tumbled against other major rivals Tuesday, including hitting a new yearly low against the euro, as investors continued to show rising appetite for risk.
The greenback's weakness came against a backdrop marked by a push higher in equities and improving economic data -- as well as renewed questions about the role of the dollar as the world's premier reserve currency.
The dollar index (DXY 77.33, -0.69, -0.89%) , a measure of the greenback against a trade-weighted basket of rivals, earlier fell to 77.093, the weakest since September 2008, and stood recently at 77.278, down 1.1%.
European equities followed Asia's lead and U.S. benchmark indexes opened higher, with the Standard & Poor's 500 Index (SPX 1,024, +8.02, +0.79%) rising 0.6%. See Europe Markets.
"With stock markets still trading higher, risk appetite has remained on the upside, promoting the better stance of the euro, British pound and other 'risky' trades versus the dollar," said Jane Foley, research director at Forex.com, in a note to clients.
The euro rallied to a new high for the year of $1.4507, according to FactSet Research. In recent action, the euro changed hands at $1.4478, still a sizable gain of nearly 1% on the day.
'The greenback was universally sold on reignited concerns about the capacity of the U.S. dollar to retain its global reserve status.'
T.J. Marta, Marta on the Markets
The dollar also traded at 92.31 Japanese yen, down 0.8%.
A pledge by the Group of 20 finance ministers and central bankers to continue stimulus measures until an economic recovery is secured also had the effect of hitting the dollar. See more on the Group of 20's weekend meeting.
"The improved sentiment and the assurance the G20 will maintain accommodation for an extended period, the recovery in the equities and a surge in gold above $1,000, are contributing to the moves," said strategists at Brown Brothers Harriman.
Also contributing to the action in currencies, a strong rise in July German exports and an unexpectedly large jump in British industrial production fed into the rising tolerance for risk, analysts said.
Germany's Federal Statistics Office on Tuesday said exports rose 2.3% in July, while imports were unchanged. Subsequent data on July German industrial production showed the recovery remains fragile, said Ben May, European economist at Capital Economics. See more on German data.
The euro was unfazed by the figures, however.
The British pound saw a big jump, meanwhile, rising 1.1% against the dollar to trade at $1.6528, as U.K. manufacturing output for July came in much stronger than forecast.
