Summary Dollar tumbled against major rivals as US Treasury chief said weaker currency was good for economy.
NEW YORK (AFP) - The US dollar tumbled against major rivals on Wednesday, with the euro reaching a three-year high as US Treasury Secretary Steven Mnuchin said a weaker currency was good for the economy.
"Obviously a weaker dollar is good for us, is good as it relates to trade and opportunities, but longer-term I think the strength of the dollar is a reflection of the strength of the US economy," Mnuchin said at the World Economic Forum in Davos.
Mnuchin s comments were widely interpreted as a green light from Washington to let the value of the dollar crumble so US exports become cheaper for buyers in other countries.
"The US dollar bloodbath continues," said James Hughes at Axitrader, and is "becoming just as much a hallmark of the Trump presidency as the equity market rally."
The euro reached $1.2402 -- the highest level since December 2014 -- while the greenback fell below 110 yen for the first time since September, and the pound shot up to hit $1.4241.
But Fawad Razaqzada, market analyst at Forex.com, noted that "Mnuchin said what we all know, that a weaker dollar is good for US trade."
The dollar already had been weakened by US President Donald Trump s announcement earlier this week of steep tariffs on imports of solar panels and large washing machines, angering China and South Korea.
US Commerce Secretary Wilbur Ross, also in Davos, defended the tariffs and said Washington would not flinch from reprisals against countries that flout the rules.
The dollar s sell-off was also helped by investors betting on tighter monetary policies by major central banks, bringing them in line with the Federal Reserve.
The European single currency also profited from accelerating business activity in the eurozone, while sterling got a boost from rising expectations of more British interest-rate rises this year after British unemployment data was well-received by markets.
Investors now are looking to Thursday s European Central Bank meeting for any reaction by ECB chief Mario Draghi to the euro s surge amid strong signs the bank is planning to wind down its support for the bond market and ultimately raise interest rates.
But any prolonged strength of the euro would go a long way in that direction as the currency s strength puts an unwelcome damper on inflation which the ECB is desperately trying to rekindle.
"Draghi will have to clarify things," Societe Generale economist Michel Martinez said.
As so often before, the smooth-talking ECB chief likely will play for time in hopes that other factors -- such as wage growth in the eurozone -- will fire price increases, many analysts expect.
In commodities trading, gold hit a four-month high at $1,349.40 an ounce as the US currency weakened, while oil futures rose to their highest level since December 2014 after US data showed a drop in crude oil stockpiles.
Europe s main stock markets fell as rising local currencies weighed on multinationals earning in dollars.
Wall Street stocks were mixed, with the Dow advancing modestly to a fresh record, but the S&P 500 and Nasdaq retreating after multiple days of record closes.
