LONDON--The dollar is sharply lower in Europe Thursday, suffering from an end of year selloff that has caught many market participants off guard.
The dollar spent most of Wednesday climbing against its peers with support coming from wavering stocks, declining risk appetite and rising short-term U.S. yields.
Sterling came under particular pressure Wednesday, falling to an 11-week low of $1.5834 and looked set to retest its October low of $1.5708.
However in late U.S. trade Wednesday, the euro/sterling cross came under intense pressure falling over a penny in stop-driven trade to a one-week low of £0.8944 and helping it to recover to almost $1.61 by the close.
Thursday brought the Nationwide December house price survey which reported a 5.9% year-on-year increase, although that number was tempered by the building society's observation that short-term momentum in the housing market showed signs of cooling.
However the market seems to have taken more notice of the annual increase in house prices, rather than the outlook for the sector, and pushed the pound to a 10-day high of $1.6150 in early trade.
Euro/dollar, initially weighed on by cross selling, just managed to hold on to the $1.43 mark Wednesday, but started to climb in Asian trade Thursday and with large stops triggered above $1.4375 it went on to a high of $1.4440.
It was much the same story for the Australian and New Zealand dollar, which both rallied strongly against the U.S. dollar in year-end demand and stop driven trade.
The Aussie currency briefly touched $0.90, the first time this level has been seen in two weeks.
The dollar did have a bit better luck against the Japanese yen, possibly helped by the Tokyo holiday which has curbed liquidity.
Exporter offers continue to cap the rate below ¥92.60, however sizable yen sell orders against the Australian and New Zealand dollars and the euro are preventing the Japanese currency from gaining ground against the dollar.
Away from the dollar, the closely watched euro/swiss franc cross has fallen to it lowest levels since the Dec. 21 slump when it breached 1.50 without a response from the Swiss National Bank, which had staunchly defended that level since it introduced quantitative easing March 12.
