* Dollar index hits 3-yr low, euro hits 17-mth high
* Euro may head toward $1.50, Aussie $1.10
* But euro faces resistance at $1.49, more ahead of $1.50
By Jessica Mortimer
LONDON, April 28 (Reuters) - The dollar plumbed a three-year
low against a currency basket on Thursday, while the euro was
set to attack a key psychological level of $1.50, as the view
that U.S. interest rates would stay low spurred more dollar
selling.
The dollar dropped across the board, with the Australian
dollar charging through previous highs to a 29-year peak above
$1.0900 and looking poised to break $1.10 while both the euro
and sterling vaulted to 17-month highs.
Traders and analysts said Asian central banks diversifying
dollar proceeds into euros and other currencies was a major
factor in the dollar's falls after earlier talk of dollar-buying
intervention by several Asian central banks. []
Trade calmed a little, however, as the euro stalled ahead of
resistance at $1.4900. Traders cited heavy offers from $1.4880
up to $1.4900, as well as a reported options barrier at $1.4900.
The Federal Reserve said on Wednesday it would complete its
$600 billion bond-buying programme in June but Chairman Ben
Bernanke signalled no rush to tighten monetary policy with the
jobs market still in a "very, very deep hole". []
"It's all one way across the board, everyone seems to be
betting on a weaker dollar and it seems a pretty safe bet," said
Niels Christensen, currency strategist at Nordea in Copenhagen.
"The market is taking on board the more dovish element of
the statement and the fact there is no indication of an early
rate hike." He added it was "not a bold forecast" to expect the
euro to hit $1.50 in the next week or two.
The euro <EUR=> hit a 17-month high of $1.4882 on trading
platform EBS after breaching resistance around $1.4850, the
upper part of an uptrend channel since mid-February.
It was last up 0.2 percent at $1.4805, with technical
resistance seen at the Dec. 7 peak of $1.4905. Above $1.4900,
traders reported more offers at $1.4930 up to $1.4950, where
another options barrier was reported.
"The euro is going up because it is the prime reserve
alternative to the dollar," said Neil Mellor, currency
strategist at Bank of New York Mellon.
Subdued implied volatility in the euro suggested the euro's
latest rise could continue in the near term.
Despite a 2 percent rise in the single currency so far this
week, one-month implied euro/dollar vols had pulled back to
around 10.6 percent <EUR1MO=> on Thursday, after popping above
11.0 percent earlier in the week.
One-month EUR/USD risk reversals <EUR1MRR=ICAP> were flat
around 0.85 in favour of euro puts, suggesting the premium to
sell euros remains relatively low even as investors brush off
euro zone debt problems and plough into the single currency.
Many options analysts have been surprised that risk
reversals have seen a limited move even as spot euro/dollar
climbs higher, which suggests the risk of a sharp turnaround in
the euro remains limited at the moment.
Some in the market say a consolidation in spot euro/dollar
would be required for risk reversals to start moving lower,
while a rise to $1.50 may also push them down.
LOOSE U.S. POLICY
The dollar index, which measures the dollar's value against
a basket of currencies, slid to a three-year low of 72.871, and
last stood at 73.188 <.DXY>, down 0.5 percent on the day.
A Reuters poll on Wednesday showed most U.S. primary dealers
expect the Fed to keep interest rates near zero until the end of
2011. [] By contrast the European Central Bank has already
raised and the Bank of England are seen likely to raise interest
rates later this year. <ECBWATCH> <BOEWATCH>
The dollar index has slid nearly 4 percent this month,
bringing it closer to a record low of 70.698 hit in March 2008.
The higher-yielding Australian dollar <AUD=D4> scaled a
fresh 29-year high of $1.0948 and was last up 0.6 percent at
$1.0932, while sterling hit a 17-month peak of $1.6747 <GBP=D4>,
and was last up 0.35 percent at $1.6684.
The dollar was down 0.6 percent at 81.74 yen <JPY=>, with
options expiries reported at 81.50 and 82.00 yen.
(Additional reporting by Naomi Tajitsu; Editing by Toby Chopra)
