LONDON: The U.S. dollar fell against a basket of major currencies for a fifth consecutive trading day on Tuesday, reaching its lowest level in more than two years, under pressure from low yields and bleak economic data in the United States.
The dollar has enjoyed years of gains but the coronavirus pandemic has hit the world's largest economy hard, leaving investors looking for growth opportunities elsewhere.
The dollar index was last down 0.3% at 92.55, after falling to 92.46, its lowest since June 2018.
A fresh rally in tech stocks provided a positive backdrop for markets and subdued demand for the safe-haven dollar, while a worse than expected reading of the New York Fed's Empire State business conditions index in August also helped traders stick to their bearish view on the currency.
Net bearish bets on the greenback rose to their largest since May 2011 last week, and spot trade in recent days suggests the position has only grown further since.
Real money and leveraged investors preferred to express their negative view on the dollar via the most-traded currency pair in the world - euro/dollar - pushing euro longs to a new record high in the week to August 11, latest CFTC data showed.
"The dollar weakness is not over, so I would not subscribe to the camp that says it has become a crowded trade," said Neil Jones, head of hedge fund sales at Mizuho. "There's a sufficient amount of momentum and a positive sentiment as well for the euro, so I would suggest that there is a lot more going on in euro/dollar."
He said all eyes were on the key psychological $1.20 level for the euro, with further gains in store if the level is broken.
The dollar was last down 0.2% versus the euro at $1.19 and had fallen 0.5% against the Japanese yen to 105.40, a 1-1/2-week low.
The yield on the 10-year US Treasury bond has drifted back below 0.70% in recent days after rising from a low of 0.50% hit earlier this month.
The greenback also declined 0.5% against the British pound to $1.3180, its weakest level in nearly two weeks.
Even though it has fallen in the past weeks, the dollar remains 27% above its 2011 levels, suggesting more declines could be in store for the US currency, especially on a trade-weighted basis, analysts said.
"There's lots of room, on that basis, for the dollar to fall, and most of the reason for the euro's recovery, for example, is simply that the dollar is weaker because of the Fed's policy shift," said Kit Juckes, macro strategist at Societe Generale, referring to the Federal Reserve loosening the interpretation of its inflation mandate.
Among G10 currencies, the kiwi was the laggard as New Zealand's largest city remained under lockdown and anticipation of future monetary easing weighs on the currency.
It last bought $0.6558 and traders said bets on the kiwi dropping had helped support the Aussie as investors sought exposure to the Aussie/kiwi cross, which is trading at a two-year peak.
- Reporting by Olga Cotaga