Forex - U.S. dollar sharply lower on risk on flight

Investing.com - The U.S. dollar traded mostly lower against its major counterparts as the Federal Reserve signaled low interest rates to continue triggering a risk on flight by investors

During U.S trade, the dollar was lower against the euro, with EUR/USD adding 0.63% to hit 1.3192.

Creating the risk on environment, Fed Vice Chairman, Janet Yellen lent support to the central bank’s stance that interest rates will remain low through 2014, since the goal of full employment was missed and inflations remains steady.

Yellen stated, “I consider a highly accommodative policy stance to be appropriate in present circumstances.”

Italy auctioned EUR2.88 billion of the EUR3 billion of three-year bonds on offer, at an average yield of 3.89% compared to 2.76% at a similar auction last month, amid persistent concerns over the risk of sovereign debt contagion from Spain.

The euro had found support earlier after a senior European Central Bank official said Wednesday that the central bank still had its bond-buying program available as an option to ease pressure on Spanish bond yields.

He added that the current level of market pressure on Spain was not justified given the reforms being undertaken by its government.

Meanwhile, official data showed that industrial production in the euro zone rose unexpectedly in February, but the year-on-year fall was still the steepest since December 2009.

Eurostat said that industrial production rose to a seasonally adjusted 0.5%, from 0.2% in the preceding month, defying expectations for a 0.3% decline.

Industrial output dropped 1.8% in the year to February, in line with expectations.

The greenback was also lower against the pound, with GBP/USD rising 0.25% to hit 1.5948. 

In the U.K., official data showed that the goods trade deficit widened more than expected in February, as exports to countries outside the European Union dropped.

The Office for National Statistics said the goods trade deficit widened to GBP8.8 billion compared with a forecast of GBP7.7 billion and up from GBP7.9 billion in January. 

Meanwhile, the greenback was higher against the yen, but lower against the Swiss franc, with USD/JPY gaining 0.23% to hit 81.05 and USD/CHF giving back 0.21% to hit 0.9155.

Earlier in the day, the governor of the Bank of Japan said the bank will pursue “powerful easing” to help overcome deflation and put the economy on a sustainable growth path.

Elsewhere, the greenback was down against its Canadian, Australian and New Zealand counterparts, with USD/CAD slipping 0.39% to hit 0.9999, AUD/USD jumping 0.93% to hit 1.0395 and NZD/USD rising 0.42% to hit 0.8213.

In Australia, official data showed that the economy added 44,000 jobs in March, far better than forecasts for an increase of 6,000, while the unemployment rate ticked down to 5.2%, from 5.3% in February.
 
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.59% to trade at 79.47.