Dollar Falls Broadly on China Currency Comments

The U.S. dollar fell broadly Friday after China renewed its call for a super-sovereign reserve currency and as improving appetite for risk dented the greenback's safe-haven allure.

China's central bank on Friday did not mention the dollar by name, but said it was a serious defect in the international monetary system that one currency should dominate.

Chinese officials have repeatedly expressed concern about the dollar's reserve status in recent months, and analysts have said the sheer size of Beijing's holdings of U.S. debt means such remarks are likely to continue to put pressure on the dollar.

"The Chinese own a tremendous amount of U.S. Treasurys," said Fabian Eliasson, vice president of currency sales at Mizuho Corporate Bank in New York. "They are obviously worried about inflation and losing value on their investments."

Still, analysts said an improvement in investor appetite for risk following a series of global liquidity measures this week also weighed on the dollar, which was on track to end the week on a softer note.

"An improvement in risk appetites is also a potential reason for today's dollar decline," said Nick Bennenbroek, head of currency strategy, at Wells Fargo Bank, in New York. "While these types of comments (from China) are understandably undercutting the dollar...there is no evidence of large scale selling of U.S. Treasurys as yet."

An index that measures the dollar's performance against six major currencies fell to around 79, just shy of a two-week low of 79.562 seen earlier this week.

The euro rose to near $1.40, heading toward a two-week high of $1.4138 hit this week. Against the yen , the dollar slipped to about 95 yen.

Adding to the positive market sentiment, U.S. government data on Friday showed a larger-than-expected jump in personal income in May. Consumer spending, which accounts for over 70 percent of the country's economic activity, also rose in May.

A separate survey showed U.S. consumer confidence rose in June to the highest since February 2008, as expectations grew that the worst economic recession since the Great Depression may be ending.

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"A pick-up in risk appetite yesterday weighed on the dollar and we are still seeing that sentiment impact flows today," said John Rivera, currency analyst at DailyFX.com in New York.

Elsewhere, however, traders remained cautious about more currency intervention by the Swiss National Bank to weaken its domestic currency against the euro and the dollar to protect the export-driven economy.

Data on Friday showed Switzerland's leading growth indicator, the KOF Swiss Economic Institute's economic barometer, rose to minus 1.65 points in June — its first rise in two years — beating forecasts of minus 1.76.

The euro was last down against the Swiss franc at around 1.52 francs. Broad dollar weakness dragged the U.S. unit down to near 1.08 francs, down more than 1 percent on the day.

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