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During early deals on Tuesday, the US dollar plunged to new multi-month lows against its Australian, New Zealand and Canadian counterparts as a further advance in stock and oil prices boosted demand for currencies seen as higher risk.
The dollar and the yen are viewed as safe-haven currencies and both currencies gain when investors turn risk averse and fall when risk appetite improves.
The dollar also declined to an 8-week low against the European currency and a 5-day low versus the British pound.
Most Asian and European shares traded higher today on increasing optimism about a recovery after Wall Street ended higher following a late session modest recovery.
U.S. stocks ended higher after a report showed an increase in new home sales boosted optimistic expectations of a recovery in the world's largest economy.
The U.S. Commerce Department released a report yesterday showing that new home sales in the month of June increased by much more than economists had been anticipating, spurring investor risk appetite with money flowing in to equities, the euro and higher-yielding currencies like the Australian dollar.
The report showed that new home sales jumped 11 percent to an annual rate of 384,000 in June from the revised May rate of 346,000. With the increase, new home sales rose to their highest rate since 390,000 in November of 2008.
While sales were down 21.3 percent compared to the same month a year ago, they still came in well above the economists' expectations. Economists had expected sales to rise to 352,000 from the 342,000 originally reported for the previous month.
The market may look forward to a data on May home prices for additional confirmation that the U.S. housing market may be starting to recover from the worst of its slump -- a root cause of the global economic crisis.
The S&P/Case-Shiller Home Price Index for May, Conference Board's consumer confidence data for July and the Richmond Fed's Manufacturing index for July are scheduled for release in the North American session.
Also, the Federal Reserve Bank of San Francisco President Janet Yellen speaks in Coeur D'Alene, Idaho at 11:30 am ET. Nevertheless, investors are also nervous ahead of the end of talks in Washington between the U.S. and China.
The United States, which ran a record $266 billion trade deficit with China in 2008, is seeking ways to rebalance trade, including persuading the Chinese to liberalize exchange rates so that the yuan appreciates to trim Chinese exports and boost imports.
China's Assistant Finance Minister Zhu Guangyao said on the first day of bilateral talks with U.S. officials that his government remains "concerned" about the value of its U.S. assets.
Zhu's remarks come after repeated public assurances by Treasury Secretary Timothy Geithner that the U.S. is committed to reining in a record budget deficit once an economic recovery is secured. China is the biggest foreign investor in U.S. government debt, and any decline in demand could push up borrowing costs.
Against the European currency, the U.S. dollar edged down to 1.4306 during early deals on Tuesday. This set the lowest point for the dollar since June 3, 2009. The next downside target level for the greenback is seen around 1.443. The euro-dollar pair closed Monday's North American session at 1.4233.
The dollar that climbed to a 15-day high of 1.3834 against the European currency on July 8 weakened thereafter and has lost around 3% thus far.
The U.S. currency declined to a 5-day low of 1.6558 against the British pound during today's early deals. The pound-dollar pair is currently trading at 1.6527, with 1.660 seen as the next target level. The pair closed yesterday's deals at 1.6488.
The greenback has depreciated around 3% after hitting a 1-month high of 1.5986 against the pound on July 7.
Against the Swiss franc, the US dollar touched a low of 1.0661 during Tuesday's early deals. On the downside, 1.061 is seen as the next target level for the dollar. The dollar-franc pair closed Monday's New York deals at 1.0711.
The dollar-franc pair that traded near a 5-week high of 1.1024 on June 24 has lost around 3.2% since then.
Today, the UBS bank said its consumption indicator for Switzerland increased in June, indicating that consumer spending in the country slightly improved after a 12-month downswing.
The consumption indicator increased to 0.96 in June from 0.75 in May, revised from 0.77 reported initially. But, it remained below its long-term average of 1.50 for the ninth consecutive month.
The US dollar traded down against the Japanese yen during early deals on Tuesday. At 4:35 am ET, the dollar-yen pair slipped to 94.84, compared to 95.21 hit late New York Monday. If the pair falls further, 93.2 is seen as the next target level.
Crude oil prices were on track to post their 10th straight day of gains, which boosted commodity currencies. The dollar thus plunged to new multi-month lows against the Australian, the New Zealand and the Canadian dollars.
U.S. crude rose 15 cents to $68.51 a barrel by 4:50 am ET, after surging to $68.99 on Monday, the highest since July 2, spurred by robust U.S. homes sales data. London Brent crude rose 27 cents to $71.08 barrel, off an earlier four-week high at $71.35.
The greenback tumbled to new multi-month lows of 0.8341 against the Australian currency, 1.0753 versus the Canadian dollar and 0.6638 against the New Zealand dollar during early deals on Tuesday. The next downside target level for the U.S. currency is seen around 0.843 against the aussie, 1.066 against the loonie and 0.679 against the kiwi. The U.S. dollar closed Monday's deals at 0.8229 against the aussie , 1.0814 versus the loonie and 0.6570 against the kiwi.
The Australian dollar registered strong gains against its major counterparts after the Reserve Bank of Australia Governor Glenn Stevens said the nation's downturn may not be "one of the more serious" of the post-World War II era.
Australia's economy may rebound faster than the central bank forecast six months ago as consumer and business confidence surges, Stevens said.
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