The dollar slipped on Monday as traders took a lack of agreement on currencies among Asian and U.S. leaders as a cue to sell the greenback, even as speculation of a near-term yuan appreciation cooled.
The U.S. currency also came under selling pressure with European shares rising and gold hitting a fresh record high, suggesting an increase in risk appetite.
The United States and China failed to reach an agreement over currencies at a summit of the Asia Pacific Economic Cooperation (APEC) forum in Singapore at the weekend, resulting in the omission to a reference to market-oriented exchange rates from the communique.
Analysts said traders took the removal of the currency reference in the statement as a green light to keep the dollar's ongoing downtrend intact on the view that U.S. interest rates will stay low as those in other countries eventually rise.
There were no comments against the weak dollar (from APEC), and that's giving the market free rein to sell the dollar, said Ante Praefcke, currency strategist at Commerzbank.
The disagreement between Washington and Beijing comes as U.S. President Barack Obama visits China this week. The yuan's peg to the dollar keeps the Chinese currency weak against its U.S. counterpart, and any yuan appreciation is seen weakening the dollar.
By 1019 GMT, the dollar was down 0.4 percent at 75,010, near a 15-month trough hit last week.
The euro EUR= rose 0.4 percent to $1.4965, edging closer to the psychologically key $1.50 level. Market participants said the euro was supported by a 0.9 percent rise in European shares .FTEU3 in early trade.
The dollar JPY= slipped 0.3 percent to 89.50 yen.
Traders offered limited reaction to data showing Japan's economy grew at the fastest pace in more than two years in the third quarter.
Dollar/yen trading was hemmed in narrow ranges on Monday, but the market was on the lookout for yen outflows from Japanese investment trusts launching on Monday and Tuesday, as well as possible yen repatriation from U.S. Treasury coupon flows.
NET USD SHORTS INCREASE
The dollar has been battered in past months on speculation that U.S. rates will stay essentially at zero until around mid-2010, keeping the return on U.S. assets lower than those in other countries including Australia and Norway, were interest rates have been raising rates.
As such, analysts expect the euro to climb above $1.50 in the near term, despite two failed attempts to make a sustained break above the level in the past month. A climb above $1.5064 -- hit last month -- would be the euro's strongest in 15 months.
Traders continue to bet on more weakness in the dollar, with data on speculator positioning shows net short positions in the U.S. currency rising against the euro, the yen and the Swiss franc last week.
Despite the failure of EUR/USD to break meaningfully above $1.50 long EUR positions have been extended -- albeit remaining well below the crowded levels seen in early October, analysts at Danske said in a research note.
With little in the way of economic data or events in the European session, analysts said the market would be watching U.S. retail sales due later in the day. A strong reading may boost risk demand and push the dollar lower, they said.