The dollar fell to a record low against the euro on Tuesday but rebounded slightly from its three-year nadir against the yen on what traders said appeared to be Tokyo’s intervention to boost the currency.
The dollar plummeted to a fresh 11-year low against the British pound and fell to its lowest level in nearly eight years against a basket of currencies under the weight of persistent concerns about the U.S. current account deficit and expectations of continued low U.S. interest rates.
“Obviously in this market when the euro goes up to $1.28 but the dollar doesn’t fall below 106 yen, that tells you there is something going on,” said one senior trader at major bank in New York.
The Bank of Japan, however, did not confirm any yen-selling intervention.
U.S. economic data did not come help the greenback with a surprise slowdown in the pace of expansion in the U.S. services sector. The Institute for Supply Management’s December non-manufacturing index slipped to 58.6 from November’s 60.1. Analysts had expected an expansion to 61.3.
Separately, a Commerce Department report showed November factory orders fell 1.4 percent, after rising 2.4 percent in October.
“Overall, there are very few technical or policy barriers to limit the dollar’s fall right now,” said Patrick Brodie, chief dealer at SMBC in New York.
In afternoon New York trade, the euro was up 0.78 percent at $1.2757, but off the record high $1.2812.
“I think this move is beginning to feed on itself. The dollar is falling because it’s falling,” said Marc Chandler, chief currency strategist at HSBC in New York.
The dollar traded at 106.15 yen, off slightly on the day but up from the session low 106.03 yen.
The dollar fell on Monday to a new three-year low of 106.01 yen, and many analysts believe Japanese monetary authorities have been in the market selling yen for dollars in hopes of curbing dollar losses below 106.
Japan last year spent a record 20 trillion yen in intervention to curb the yen’s export-damaging gains against the dollar. On Tuesday, Finance Minister Sadakazu Tanigaki and Zembei Mizoguchi, vice finance minister for international affairs, warned Japan would act against sudden or speculative currency moves.
Japan’s biggest business lobby, the Japan Business Federation, also said that it was vital for Japanese firms exporting to the United States that the dollar stayed above 105 yen.
In other trading, sterling rose 0.79 percent to $1.8206 but dropped back from the 11-year high of $1.8277. The dollar fell 0.36 percent to 1.2290 Swiss francs, but rose from a more than seven-year low of 1.2240 francs hit in early New York trade.
The euro rose 0.73 percent to 135.46 yen.
Earlier, French Budget Minister Alain Lambert said “brutal foreign exchange movements are bad for everyone” and euro zone policy-makers remained vigilant. But he added: “It’s important to remember that 60 percent of our trade is within the euro zone.”
Belgian Finance Minister Didier Reynders called the current euro level “relatively reasonable” but said too fast a change in the exchange rate would cause greater worry.