The dollar came under further pressure on Thursday as optimism over the propects for global growth stemmed haven demand for the US currency.
Negative sentiment towards the dollar was triggered by both a stronger-than-expected third-quarter earnings report from Alcoa, the world’s biggest aluminium producer, and an above forecast Australian employment report.
“The reports have lifted confidence in global economic recovery prospects fuelling further dollar-negative capital flows into higher yielding assets encouraging the dollar’s use as funding currency,” said Lee Hardman at Bank of Tokyo-Mitsubishi UFJ.
Figures showed the Australian economy added a robust 40,600 jobs in August, contradicting forecasts for a fall.
Analysts said the data helped validate the Reserve Bank of Australia’s decision to tighten monetary policy earlier this week and increased the prospect that the central bank would continue raising interest rates.
The Australian dollar climbed 1.5 per cent to $0.9043 against the US dollar, its strongest level in 14 months.
Meanwhile the currencies of other commodity-producing countries, which are believed to be the most likely to follow the RBA and raise interest rates, also advanced, posting fresh one-year highs against the US dollar.
The New Zealand dollar climbed 0.4 per cent to $0.7388 against its US counterpart, while the Canadian dollar gained 0.6 per cent to $C1.0552 and the Norwegian krona rose 0.4 per cent to NKr5.6598.
The dollar also lost ground elsewhere, falling 0.4 per cent to Y88.24 against the yen, dropping 0.6 per cent to $1.6058 against the pound and losing 0.6 per cent to $1.4772 against the euro.
Meanwhile, sterling held steady at £0.9198 against the euro after of the conclusion of the Bank of England’s monetary policy committee meeting.
The Bank, as widely expected, to kept UK interest rates at a record low of 0.5 per cent and did not announce a further expansion of its quantitative easing measures, keeping its asset purchase plan at £175bn.
Analysts said while the possibility of a step up in the Bank’s asset purchase plan was still on the table, it was not widely seen to be a risk until the November meeting, which will coincide with the publication of the central bank’s quarterly Inflation Report.
Similarly, the European Central Bank kept its main lending rate on hold at 1 per cent after its policy meeting.
However, analysts said the market would be wary of any further comments over the recent strength of the euro from Jean-Claude Trichet, ECB president, in his post-meeting press conference.
“There is a risk that Mr Trichet could repeat the complaint that other currencies should share the brunt of the dollar’s adjustment lower or he may re-endorse the strong dollar policy of the US Treasury,” said Jane Foley at Forex.com.
