* Singapore widens trading band for Singapore dollar
* Euro rises above $1.4100, highest in more than 8 months
* Aussie flirts with parity, dollar index hits 2010 low
(Updates prices)
By Neal Armstrong
LONDON, Oct 14 (Reuters) - The U.S. dollar index hit the
year's low on Thursday while the Australian dollar flirted with
parity after Singapore widened its currency's trading band,
piling more pressure on the struggling greenback.
The Australian dollar, which boasts the highest yield among
major currencies, soared to a 28-year peak at $0.9994 <AUD=D4>
as investors continued to dump the U.S. dollar on expectations
the Federal Reserve would again start printing money next month.
With interest rates at record lows in developed markets,
yield-hungry investors are piling cash into emerging markets.
The tide of money is rising ahead of an anticipated second round
of quantitative easing by the Fed.
"Effectively the Singapore move is a tightening of policy
and it clearly shows Asian economies are at the opposite end of
the spectrum compared to the spare capacity in the U.S.
economy," said Chris Turner, head of FX strategy at ING.
The dollar index <.DXY>, which tumbled 1 percent to its
weakest since December at 76.259, is on course for a test of
trendline support at 75.95, with its November low of 74.17 then
not far away. The 75.95 target is the trendline from two major
lows in July 2008 and in November 2009.
The euro <EUR=> surged to an eight-month high above $1.4100
in European dealing and faces resistance at $1.4195, the Jan. 25
high.
With key levels having been broken in most major currency
pairs, investors focused on the Australian dollar's assault on
parity.
"The Aussie rally is being driven by strength in the
Australian economy together with supply and a general
depreciation of U.S. dollars. There are barriers at parity but
it's difficult to see the trend changing," said Lauren
Rosborough, senior currency strategist at Westpac in London.
The Aussie eased back to $0.9960 with traders saying option
barriers at $1.0000 were slowing the rally. It has gained more
than 11 percent this year and is up around 24 percent from a low
in May.
The dollar also hit the latest in a succession of record
lows against the Swiss franc <CHF=> and slid below parity with
the Canadian dollar <CAD=>, a level not seen since April.
Commodities rallied as the dollar fell, as a weaker dollar
makes commodities, which are priced in dollars, more expensive.
Gold <XAU=> hit a record high and silver <XAG=> climbed to its
priciest in 30 years. []
After failing to crack $1.40 the previous session, the
euro's move caught some players who had been expecting more
consolidation by surprise as it triggered stops around $1.4030
and then $1.4050 in Asia and subsequently cracked the $1.41
handle in Europe. By mid-morning it had eased back to $1.4075.
SINGAPORE CATALYST
Momentum picked up after Singapore widened the trading band
for its currency and said it would maintain modest and gradual
appreciation in the Singapore dollar. The Monetary Authority of
Singapore sets policy by managing the Singapore dollar in a
secret trade-weighted band against a basket of currencies,
instead of setting interest rates. []
The U.S. dollar fell against the Singapore currency,
touching a record low of S$1.2888 <SGD=D4>. The greenback fell
to a 15-year low of 80.88 yen <JPY=> on EBS, despite wariness
about Japanese intervention, and nearing its record low of 79.75
hit in April 1995.
While traders think the Bank of Japan (BOJ) could intervene
at any moment to keep the yen in check, some market participants
speculated that Tokyo may prefer to avoid intervention ahead of
G20 meetings.
"Eighty yen is going to be a massive psychological level for
the BOJ. It adds to the pressure for a massive round of monetary
easing in Japan," said Turner at ING.
(Editing by Susan Fenton)
