The U.S. dollar slumped to a new 14-month low versus major counterparts on Tuesday, helping boost oil and gold to new highs.
The dollar pared some of those losses, especially against the commodity-oriented Australian and Canadian dollars, as U.S. equity markets opened lower, hinting as some concern about the strength of the economy's recovery.
"Taking more risk and selling more dollars is again the theme, also due to the market belief in sound U.S. [third-quarter] earnings," wrote strategists at UniCredit MIB in Milan.
The dollar index (DXY 75.99, -0.14, -0.18%) , a measure of the greenback against a trade-weighted basket of currencies, fell 0.2% to 75.9898, after hitting its lowest level in 14 months.
U.S. stock indexes opened with a 0.3% slide, while European stocks fell into negative territory. Asian shares ended mostly higher. See Europe Markets.
While focus would be on earnings announcements, currency strategists at Citi noted " unlike in previous quarters, the bar for upside surprises is now set higher and economic data releases are more mixed."
Oil futures rose above $74 a barrel, the highest in seven weeks. Gold futures jumped to a record high near $1,070. See Futures Movers. See Metals Stocks.
The rise in prices of key commodities has brought more attention to the currencies of countries that export them. After Australia's central bank unexpectedly raised its benchmark interest rate recently, more speculation has surrounded what country will be next. Canada, New Zealand and Norway are the most likely candidates.
The Australian dollar was up 0.2% versus the U.S. unit at 90.65 U.S. cents, paring an earlier advance. The U.S. dollar fell 0.2% versus the Canadian dollar to C$1.0335, despite ideas Canadian authorities may soon intervene for the first time in a decade to stem the Canadian currency's rise.
"By any stretch of the imagination, [the U.S. dollar/Canadian dollar cross] is starting to look stretched," said Simon Derrick, currency strategist at Bank of New York Mellon.
"Not only does it stand within a whisker of breaking through parity for the first time since the fourth quarter of 2007 but it now also stands over 20% below its average price for the past quarter of a century."
The euro rose to the highest since August 2008 to buy $1.4822, up from $1.4786 late Monday in North American trading.
The euro initially retreated after the German ZEW economic sentiment indicator posted a small but unexpected fall, underlining expectations the German economic recovery will be relatively subdued, analysts said. See full story.
The British pound was up marginally versus the dollar at $1.5837. The pound initially weakened after data showed annual U.K. consumer inflation slowed to a five-month low of 1.1% in September. See full story.
The dollar bought 89.75 yen, compared to 89.86 yen late Monday.
"It is widely regarded that of the G10 central banks, the Bank of Japan will hike rates last if this recovery ensues," strategists at Brown Brothers Harriman wrote.
