The dollar declined from the highest level in more than five years amid speculation the currency may have strengthened too much, too fast.
The greenback slipped versus most of its 16 major peers after a gauge of the Bloomberg Dollar Spot Index’s relative strength exceeded 70 on November 28, a level some traders consider a signal an asset may reverse course.
Russia’s ruble led a drop by some commodity-producing nations’ currencies as oil reached a five-year low.
The yen gained after weakening to a seven-year low as Moody’s Investors Service cut Japan’s credit rating.
“We will be range-bound until we get something that changes the perception a little bit on either here or Europe or Asia,” said Fabian Eliasson, who works in foreign-exchange sales at Mizuho Financial Group Inc. in New York. “The trend is still intact, and I still think that the dollar’s going to go higher.”
Bloomberg’s dollar index, which tracks the greenback against the currencies of 10 trading partners, sank 0.3 percent to 1,103.71 at 5pm in New York. It closed on November 28 at 1,106.90, the highest level since March 2009, as it gained for a sixth consecutive week.
The measure’s relative-strength index reached 70.3 November 28, the highest level in three weeks.
The dollar fell 0.2 percent to 118.40 yen, after earlier touching 119.14 yen, the strongest since August 2007. The US currency depreciated 0.1 percent to $1.2470 per euro. The 18-nation currency was little changed at 147.64 yen.
Hedge funds and other large speculators increased wagers on the dollar’s strength versus eight of its major peers to a record last week. The difference in the number of positions on gains versus those on declines – net longs – was 418,825 as of November 25, according to data released Wednesday by the Washington-based Commodity Futures Trading Commission. It was 393,529 a week earlier.
Norway’s krone gained the most among the dollar’s 31 major counterparts as a measure of the country’s manufacturing rose. The currency climbed 1.3 percent to 6.9381 per US dollar after falling for three consecutive months.
Sterling rallied, adding 0.5 percent to $1.5730, after UK manufacturing growth also exceeded forecasts, accelerating at the fastest pace in four months.
The yen strengthened after sinking as Moody’s downgraded Japan to A1 from Aa3, citing heightened uncertainty over the nation’s fiscal deficit-reduction goals. The currency rallied versus most of its 31 major peers.
“The yen was resilient after the rating cut because the move was expected,” said Athanasios Vamvakidis, head of Group of 10 foreign-exchange strategy at Bank of America Merrill Lynch in London.
Prime Minister Shinzo Abe officially starts his campaign tomorrow for a new mandate to pursue unprecedented monetary easing and reform, before national elections December 14. In an Asahi newspaper poll, 47 percent of respondents said the economy would be an important factor in their decision.
Capital spending rose 5.5 percent in the third quarter, a report showed, exceeding the median estimate of economists for a 1.8 percent gain.
