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FOREX-U.S. dollar tumbles broadly; near all-time lows

Published 04/21/2011, 10:08 AM
Updated 04/21/2011, 10:12 AM

* US Dollar hit across the board, DXY near all-time low

* Euro/dollar above $1.46, poised to push towards $1.50

* Risk of profit-taking seen before Easter holiday

(Updates prices, adds comment, changes byline, dateline, previous LONDON)

By Wanfeng Zhou

NEW YORK, April 21 (Reuters) - The U.S. dollar tumbled for the third straight day on Thursday, as investors dumped the greenback and left little standing in the way of an all-time low against a broad measure of currencies.

The dollar was taking a hit from all directions as investors fretted over ultra-low U.S. interest rates, the threat of a credit rating downgrade, and the competition of the euro as an alternative reserve currency.

"If you look at all these big picture things, there's no reason to buy dollars right now," said Ronald Simpson, director of currency research at Action Economics in Tampa, Florida.

The U.S. dollar index, which tracks the greenback versus a basket of currencies, fell 0.4 percent to 74.086 <.DXY>, having slipped to 73.735, the lowest since August 2008.

The chart outlook for the greenback looked dire after it tumbled through a 74.17 trough hit in November 2009, a move that may spark a run towards the 70.698 all-time low hit in 2008.

"In the ugly dog currency competition the dollar is looking like the really ugly dog. The euro zone at least looks to be doing something about their debt problems," said a London-based head of FX sales.

Expectations the Federal Reserve will keep U.S. interest rates at near zero for the foreseeable future, even as other major central banks have begun raising rates or are about to tighten have pressured in the dollar in recent weeks.

Adding to the dollar's woes were a threat by Standard & Poor's on Monday to cut the United States' prized triple-A credit rating.

The euro climbed to a 16-month high against the dollar near 1.4650, partly helped by M&A-related demand and an increase in risk appetite. The euro last traded at $1.4543 , up 0.2 percent.

Analysts said the euro looked on course for a move towards $1.50 if the current momentum continues despite the possibility of a Greek debt restructuring.

The single currency has vaulted from $1.4155 hit on Monday, and analysts said that few in the market were brave enough to counter insatiable euro demand from Asian sovereigns, which have been seen swooping in to buy the currency whenever it sells off.

Market participants say central banks have recycling dollar proceeds into the euro, Aussie and other currencies.

Asian authorities have increasingly had to intervene to buy dollars to limit the gains in their currencies and then shift them into other currencies and assets.

This has helped the euro to brush off ongoing worries about the euro zone crisis, underscored this week by speculation that Greece may have to restructure its debt.

The Australian dollar soared to a 29-year high while the Canadian currency pushed up to its strongest since late 2007, though traders warned the moves could reverse as investors take profit on short dollar positions before the long Easter weekend.

Broad dollar weakness pushed the Swiss franc to an all-time high.

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Euro zone hit by Greek debt fears [ID:nLDE73J16U]

Breakingviews on Greek debt scenarios: [ID:nLDE73J1F7]

GRAPHICS

Asset returns in 2011 http://r.reuters.com/zub29r

Inflation-adjusted gold http://r.reuters.com/ren88r

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The dollar lost 1.0 percent against the yen to 81.67 yen . (Additional reporting by Jessica Mortimer in London)

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