The dollar hit its lowest level in more than four months against a basket of major currencies on Wednesday, continuing its slide as investors stuck to the view that the worst of the global financial crisis had passed.
That reduced safe-haven demand for the dollar and bolstered assets perceived to have higher risk, such as emerging market currencies, including commodity-based units such as the Australian and New Zealand dollars.
"The green shoots argument is still in play," said Meg Browne, senior currency strategist, at Brown Brothers Harriman in New York.
"Overall, the financial and economic situation has improved from a few months ago, and that has helped the foreign currencies such as the euro and sterling and hurt the dollar."
Market participants said comments from Portugal's finance minister that the European Union was not concerned about strength in the euro helped the single currency to extend gains.
In early New York trading, the euro was up 0.5 percent at $1.3682, having climbed as high as $1.3711 according to Reuters data. Technical analysts say the pair face heavy chart resistance above $1.37.
In an interview with Reuters, Portuguese Finance Minister Fernando Teixeira dos Santos said a stronger euro, which has gained more than 3 percent against the dollar in the past month, had not been a concern among European finance ministers.
The single euro zone currency was up 0.2 percent at 131.11 yen .
DOLLAR LOSING LUSTER
Gains in the euro pushed the ICE Futures' dollar index _.DXY, which tracks the dollar's movements against six major currencies, to as low as 81.656, its lowest since early January. The dollar index has lost nearly six percent since it hit a roughly one-month high last month.
The euro makes up the biggest share of the index, and as a result, can be a driver of index moves.
The dollar was down 0.3 percent at 95.71 yen.
Sterling was up slightly at $1.5487 retreating from a five-month high of $1.5545. Traders booked profits after the currency rallied on easing pessimism about the UK economy and financial sector.
Minutes from the Bank of England's May policy-setting meeting showed policymakers voted unanimously to keep interest rates at a record low of 0.5 percent and extend its quantitative easing program by 50 billion pounds, although they discussed a bigger increase.
Traders are now focusing their attention on the minutes from the Federal Reserve's policy-setting meeting on April 28-29, due later in the day.
