The dollar retreated to yearly lows amid continued rallies in stocks, commodities and overall economic sentiment. The U.S. Dollar Index -- a measure of the dollar against a basket of currencies -- fell 0.7% to 75.63, its lowest level this year in midday trading. The euro hit a new post-crisis high against the dollar, up 0.23% to $1.4887 per euro. The dollar was mostly flat against the yen, falling to 0.03% to 89.65 yen. Driving the dollar lower was the continued awakening of investors to the global economic recovery. China reported better-than-expected trade and loan-growth numbers. J.P. Morgan issued a reassuring earnings report and U.S. retail sales exceeded forecasts. Treasury yields were sharply lower. Tuesday's late news that Intel Corp.'s earnings surpassed forecasts led investors in Asia and Europe to shift low-yielding dollars into riskier assets, especially in emerging markets and commodity-linked countries such as Canada and Australia.Stocks in Asia and Europe were up strongly Wednesday, and spot gold hit a new high in Asian hours of $1,071.80 a troy ounce. Oil hit $75 a barrel for the first time this year Wednesday on growth hopes. "As long as risk appetite rally continues, the dollar will be on its back foot," says Paul Mackel, foreign exchange strategist for HSBC Holdings PLC in London. He says traders have been taking advantage of short rallies in the dollar -- as happened Monday and Tuesday -- to continue to bet against the buck. "This dollar bear trend is picking up momentum," Mr. Mackel says. "In some respects it's getting to quite high levels for the different exchange rates. But what can policy makers do? It's not a disorderly move by the dollar," he says. Indeed, the dollar's slide since its high in March has been mostly smooth, only occasionally moving more than 1% against the euro in a single day. The euro is up 6.5% against the dollar so far this year, but still below its April 2008 high of $1.5981. The dollar's slide, however, is creating political problems in countries whose exports sectors suffer when their currencies appreciate such as Japan and Canada. Currency specialists have speculated whether either might intervene in markets to stem their currencies appreciation for the first time in years. Canada especially is in the currency spotlight as its dollar, nicknamed the loonie, approaches the symbolic level of parity with its southern neighbor for the first time since mid 2008. Canadian officials have said the loonie's strength in imperiling the economic recover. The U.S. dollar was down 0.53%, buying 1.0270 Canadian dollars in Wednesday trading. But intervention in the currency markets tends to have limited effect unless the action is very large and well coordinated among central banks. Asian central banks in South Korea, Taiwan and elsewhere have intervened in recent months, buying up dollars, but their actions have mostly slowed or smoothed their currencies' appreciation against the dollar, rather than reversing the flow. Despite plenty of chatter about concerns of a sudden burst of inflation or the loss of the dollar's status as the world's reserve currency, economic decision makers in the U.S. are unlikely to get too concerned unless the dollar makes more pronounced moves, or if markets for U.S. government bonds begin to react negatively. So far, that's not happening. Bond yields on U.S. government debt remain low amid strong demand at auctions for new treasuries. And other asset classes seem to love the weak dollar. Stocks and commodities rally when the dollar declines. Bond prices have stayed firm -- keeping yields low -- as the buck has deflated over the last half year. "Concerns of an outright U.S. dollar crisis are overdone," BofA Merrill Lynch currency strategist Steven Pearson wrote in a note Wednesday. "We find the suggestion of an impending U.S. dollar crisis caused by a run-up in inflation or a sudden shift away from the dollar as the global reserve currency unconvincing."

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