TOKYO - The dollar sank to a record low against the euro on Thursday and stood near a 12-year low versus the pound after a round of robust U.S. economic data failed to dispel souring sentiment on the U.S. currency.
The dollar also held near multi-year lows against the yen, but the market was keeping an eye out for Japanese intervention after Japan's top currency policy official, Hiroshi Watanabe, gave his clearest warning yet of possible dollar-buying action.
Watanabe said on Wednesday that "conditions are in place" for Japan and Europe to act jointly to support the dollar and that other countries hurt by the falling currency could join in for any intervention.
But traders have repeatedly driven the dollar lower despite verbal threats, waiting for evidence the currency's near 9 percent drop against the euro and the yen in two months has gone too far too fast for Japanese and European officials.
"Traders are not going to believe it until they see it. They're going to keep blowing up the dollar until actual intervention happens," said one trader at a European bank.
In midday Tokyo trade, the euro was around $1.3360, up from $1.3345 in late New York trade and just below the fresh record high of $1.3373.
The Japanese currency climbed to around 102.35 yen per dollar, just off a 4-1/2-year high of 102.15 hit last week. Against the euro, it was stable at 136.80 yen.
Reports showing accelerating U.S. factory growth in November and a strong start to consumer spending in October did nothing to stem the dollar's slide, despite bolstering expectations for the Federal Reserve to keep lifting official rates.
By comparison, European data showed manufacturing growth stalled last month and new orders for goods contracting for the first time in more than a year, with some economists saying the dollar's gains were behind the dent to exports.
Instead the market is focused almost exclusively on the United States' ability to fund its budget and current account deficits and suspicions that Washington wants a weaker currency to help fix the trade imbalance. "Nobody seems to care about the economic data," said Marshall Gittler, senior currency strategist at Deutsche Bank in Tokyo. "That indicates sentiment for the dollar is seriously, seriously bearish."
Even a 1.5 percent jump in the S&P 500 on Monday to a new three-year high offered no solace for the dollar.
Underscoring the dollar's widespread woes, the U.S. currency stayed close to a 12-year low against the pound of $1.9359, trading at $1.9345.
That takes sterling back to levels against the dollar that were traded just before Britain was ejected from Europe's Exchange Rate Mechanism in 1992.
TRICHET IN SPOTLIGHT
Traders were looking to a news conference by European Central Bank (ECB) chief Jean-Claude Trichet at 8:30 a.m. EST, following a monetary policy meeting, to see if he supports Watanabe's suggestion of coordinated currency intervention.
If Trichet does not back up the idea of possible coordinated intervention, the dollar will likely take another beating, traders said.
Earlier this week Trichet indicated that the ECB would keep its policy stance of vigilance against inflation, comments traders viewed as suggesting the central bank is willing to tolerate some euro strength.
A stronger euro lessens the inflationary impact of higher energy costs.
Traders and investors were also looking past the steady rise in U.S. government bond yields above those in Europe and well above those in Japan, though that rise could reflect investor diversification out of dollar-based assets.
The difference between the 10-year U.S. Treasury note yield and the 10-year Bund is up almost 20 basis points in a little more than a week to 60 basis points, a four year high.
Meanwhile, the Fed has already doubled its funds rate this year to 2 percent and is expected to raise by another quarter-percentage point at its mid-December meeting and following meetings.