The US dollar was under pressure in early morning trading for the second straight day as optimistic investors waded back into riskier trades and exposure to higher-yielding currencies, shying away from the safe-haven dollar.
Compounding the dollar's negative sentiment were comments out of Russia 's central bank, which said it intends to cut the amount of currency reserves held in Treasuries and buy IMF-issued bonds.
Russia holds approximately 30% of its $404.2 billion foreign exchange reserves in Treasuries, making it the fifth largest holder of U.S. government debt.
A looming $1.8 trillion U.S. deficit and concern about the U.S. sovereign credit rating have kept dollar gains capped.
Market participants will look to a two-day meeting of finance ministers from the Group of Eight nations in Italy beginning on Friday, although few in the market expected that foreign exchange will take the spotlight at the gathering.
As markets see a glimmer of hope for the recovery of the global economy, the Japanese yen is under broad pressure from rising risk appetite and sharp gains in equities.
The euro extended gains against the dollar, as stock futures rose and investors' outlook on the global economy brightens. The euro is also garnering strength from Russia 's comments on the dollar earlier today.
The euro offered limited reaction to a surprisingly steep 1.4% slide in French industrial output in April, while April output data from Italy rose.
The sterling extended its gains against the USD, rising nearly 1%, as Russia 's comments weighed on the USD. Sterling 's sharp gains against the dollar also helped it hit its highest level in 2009 versus the euro as it extended earlier gains reflecting the belief that the economy is over the worst of the recession.
Additionally, the pound rose after data showed UK industrial output climbed unexpectedly by 0.3% in April for the first time since February 2008.
With UK interest rates expected to remain at record lows for some time, this may have a dampening effect on the pound's recent surge.
Soaring oil prices and equity markets as well as pressure on the USD are keeping the Canadian dollar well supported.
With crude oil prices rising above $70 a barrel, hitting a new seven-month high, oil markets were pleased to hear of to a U.S. report that revised global oil demand forecasts higher. This news should keep the loonie buoyant for the near future.
Advancing stocks reflected renewed interest in riskier assets, supporting high yielders including the Australian and New Zealand dollars at the expense of the US dollar.
Australian consumer confidence made its best monthly showing in over two decades in June, feeding speculation local interest rates may be near their bottom. This helped the Aussie climb to the .81 level.
Aggressive monetary policy easing and fiscal spending have helped Australia avoid a textbook definition of a recession, one of the few developed countries to do so.
The optimistic outlook has encouraged some Aussie bulls to predict the currency is set to rise further, with some analysts looking for $0.86 in the next six months, and $0.90 in the coming year.
The New Zealand dollar is also firmer today on the markets expanding risk appetite and higher commodity prices.
Traders said investors were reducing kiwi positions ahead the Reserve Bank of New Zealand 's rate review on Thursday as opinion was split on whether the bank will cut rates or stay on hold.
10-Year Treasury Note Yield : 3.9040%
Dow Jones Industrial Average : 8,753.16 -9.90