The US dollar crumbled to fresh lows on Wednesday, with traders emboldened by the lack of evidence of an impending intervention to stem the greenback's fall.
Despite the dollar falling a further 0.6 per cent to a fresh all-time low of $1.3170 against the euro, eurozone politicans were once again muted about euro strength.
Japan also refrained from intervention despite the greenback sliding 0.7 per cent to a four-and-a-half year low of Y102.58, before recovering a mite to Y102.92.
"We fully subscribe to the view that he dollar downtrend is likely to continue for months and probably years to come," said Mansoor Mohi-uddin, chief FX strategist at UBS, although he added that the holiday weekend in the US, stretched positioning among speculators and the lingering prospect of intervention might provide a temporary respite.
This respite was not evident on Wednesday, with the dollar falling 0.8 per cent to a nine-month low of $1.8822 against sterling, 0.7 per cent to a near nine-year low of SFr1.1489 against the Swiss franc and 0.3 per cent to a 12-year low of C$1.1796 against the Canadian dollar.
Elsewhere, the Swiss franc was in demand, firming 0.2 per cent to SFr1.5125 against the euro and 0.8 per cent to SFr0.9026 versus the Australian dollar. The Swissie was said to be helped by safe haven buying amid political turmoil in Ukraine.
Sterling was also solid, firming to £0.6995 against the euro. UBS argued that the pound stood to gain from the re-weighting of MSCI's equity indices, with the inclusion of mining company Anglo American in the world index likely to result in inflows of up to $4.5bn into sterling at the expense of the US, Switzerland, Japan and Sweden.
Any potential effect on Sweden was not noticeable yesterday, with the krona rising 0.5 per cent to a 12-month high of SKr8.9153 against the euro and 0.9 per cent to SKr6.777 versus the dollar, a near seven-year high, as a poll by research institute Prospera showed expectations for Swedish interest rates to hit 2.8 per cent in 12 months' time and 3.4 per cent in two years' time, compared with current lows of 2 per cent.
Renminbi/dollar one-year non-deliverable forwards pushed to a discount of 4,300 points on Wednesday, a nine-month high, suggesting a rate of Rmb7.848 to the dollar in 12 months' time, compared with the current pegged rate of Rmb8.278.
HSBC saw some dealers speculating on China making moves towards relaxing its peg at this weekend's annual China Economic Policy meeting, although the bank remained sceptical.
"The chorus of calls for China to act sooner rather than later is not diminishing, although Beijing has made it clear that not only are they not listening, but that speculative pressure for them to move actually acts as a deterrent," said Clyde Wardle, emerging markets strategist at HSBC.
