NEW YORK: The US dollar hit 10-month lows against some commodity currencies on Tuesday on a growing appetite for risky assets and lost further ground to the euro after weak U.S. economic data reinforced views that Federal Reserve monetary policy would remain dovish.
The Australian dollar hit $0.7817, its highest level against the dollar since last June, while the New Zealand dollar touched $0.7055, also its highest since last June, on the back of gains in oil prices. The Canadian dollar also rallied.
Analysts said a strike by oil workers in Kuwait, which continued for a third day and nearly halved production from the OPEC member, boosted crude prices and commodity currencies. Concerns over China's economic growth have also diminished, while the likelihood of a rapid string of Fed interest rate hikes this year has receded, they said.
The dollar gained against the safe-haven yen for a second straight day, however, as investors moved into riskier currencies. The dollar was last up 0.43 percent against the yen at 109.28 yen.
"The predominant theme is risk on," said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago.
"We came into the year concerned about Chinese growth and an aggressive Fed, and we've gotten nothing even remotely similar to where our fears were."
He also noted that recent data on Chinese manufacturing, retail sales and industrial production had been strong.
Analysts said U.S. housing starts data supported expectations that the pace of Fed rate hikes would be slow. Groundbreaking decreased 8.8 percent to a seasonally adjusted annual pace of 1.09 million units in March, the lowest level since October, the Commerce Department reported.
"Investors continue to believe that the Fed is going to be hard-pressed to even come in with two more rate increases this year," said Chris Gaffney, president of EverBank World Markets in St. Louis.
The weak housing data hurt the dollar against the euro. A survey by think tank ZEW showing the mood among German analysts and investors rose for the second consecutive month in April also boosted the euro, EverBank's Gaffney said.
The euro was last up 0.5 percent against the dollar at $1.1369 after hitting a six-day high of $1.1382.
The dollar index, which measures the greenback against a basket of six major currencies, was last down 0.47 percent at 94.044.
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