The dollar weakened broadly on Monday, pushing the euro above $1.50, after a weekend G20 meeting and U.S. jobs data last week did little to alter the view that U.S. interest rates will stay low for some time.
The conviction that U.S. -- and other -- interest rates will remain low for the forseeable future and liquidity still plentiful boosted demand not just for non-dollar currencies but for a range of other assets from equities to gold.
Traders also noted that the Group of 20 finance ministers and central bankers meeting at the weekend did not dwell on exchange rates, suggesting policymakers were not too concerned with the dollar's weakness, which remains relatively orderly.
With that, the dollar is going to remain in a structural downturn, said Paul Mackel, senior currency strategist at HSBC in London.
It looks like the market waited for the event risk to pass then sell the dollar, even though that seems to be the consensus view, he added.
The dollar's broad value against six major currencies as measured by the dollar index fell 1 percent and the euro rose back above the psychologically key $1.50 level as risk appetite spread through financial markets.
It really is a true expression of how poor dollar sentiment is right now, Mackel added, noting sterling's rise to a three-month high above $1.68 and even the low-yielding yen's relatively robust performance against the greenback.
But it's orderly, and that's the key thing. The dollar's going to remain a sell on rallies.
At 1110 GMT the dollar index was down 1 percent .DXY at 74.992, closing in on last month's trough of 74.94, a low not seen since August 2008.
The euro EUR= was up more than 1 percent at $1.5010, coming back within sight of last month's 2009 high of $1.5064.
Figures showing surprisingly strong German industrial and manufacturing output for September also supported the positive euro sentiment ECON.
Some dealers also cited an International Monetary Fund report as also weighing on the dollar. The report said that while the dollar had depreciated in recent months, it still remained on the strong side.
After a week of central bank meetings, including the Federal Reserve, the G20 gathering ended without the countries taking any concrete action to rebalance global flows or talk more specifically about the dollar's recent decline
We have positive equity markets so we have risk appetite. And that is still a dollar negative. People are buying into higher yielding currencies or currencies where rates are going higher, said Niels Christiensen at Nordea in Copenhagen.
It's difficult to pinpoint any reason to hold or buy the dollar. So the dollar is still the preferred funding currency, he said.
European stocks were up 1.7 percent .FTEU3, while U.S. stock futures pointed to Wall Street gains of around 1 percent.
Sterling rose 1.2 percent to its highest in three months at $1.6843 GBP=D4.
Data from the Commodity Futures Trading Commission on Friday showed speculators had substantially decreased their net short sterling positions to 18,905 contracts in the latest week from 31,431 contracts in the prior week.
Some traders also highlighted the 1700 GMT deadline for Kraft (KFT.N) to make its formal takeover bid for British confectionery group Cadbury (CBRY.L) or walk away for six months.
The dollar was flat against the yen at 89.90 yen JPY=.
The head of the Federal Reserve's St Louis branch, James Bullard, told the Financial Times he did not favour tightening until the recovery was well-established and suggested rates could stay near zero for all of next year.
Investors will be watching to see how U.S. Treasury yields respond to this week's record November refunding, while also keeping an eye on a batch of Chinese data for October due on Wednesday, which will include the consumer price index, industrial output data and retail sales. ECONCN