NEW YORK - The dollar fell to a low for the year Tuesday as gold prices shot above $1,000 an ounce before giving some ground and investors switched funds into riskier investments.
Commitments from global leaders this past weekend to continue underwriting the global recovery helped drive investors away from the "safe haven" dollar and into emerging-market currencies and equities, analysts said.
Published comments from a Chinese government official in a British newspaper knocking the Federal Reserve's policy of buying bonds also drove the dollar lower, said Joseph Trevisani, chief market analyst at FXSolutions.
"The Chinese have serious influence," he said. China is the largest holder of U.S. Treasury securities, and its buying of U.S. debt enables the government to fund its deficit spending.
"Most of our foreign reserves are in U.S. bonds, and this is very difficult to change, so we will diversify incremental reserves into euros, yen and other currencies," Chinese official Cheng Siwei said in the interview in the U.K.'s Telegraph newspaper.
China and Russia have been vocal this year about the need to diversify reserves away from the dollar as its value dropped. Chinese officials have called for the creation of a new global reserve currency by the International Monetary Fund.
There's an assumption that "when Chinese officials speak on this topic, they are not doing it without having their remarks vetted by the Chinese government," Trevisani said. Whether that is true or not, he said, "you assume that there is some warning here."
A report from a United Nations agency released Monday also called for a reduced role for the dollar as the world's primary reserve currency.
The dollar index fell as low as 77.05 against a basket of six major world currencies that consists of the euro, yen, Canadian dollar, British pound, Swedish krona and Swiss franc. That's its lowest since September 2008.
"People are loading up on high yielders," said Win Thin, a senior currency strategist at Brown Brothers Harriman.
Markets have been rising after finance officials from the Group of 20 leading economies pledged to maintain government spending, low interest rates and expansion of the money supply to buck up the global economy. The ministers met over the weekend in London.
Those moves could help boost economic activity and liquidity in financial markets, but can weigh on the value of a currency. The current U.S. rate near zero means investors can earn better returns on their funds in countries with higher yields, including Poland, Turkey, Brazil and Australia.
Siwei's interview and the U.N. report have "drawn attention back to the fact that we have twin deficits and low interest rates," said Michael Woolfolk, a senior currency strategist at Bank of New York Mellon in New York. That's "simply feeding into current negative dollar sentiment" as sovereign nations gradually sell their U.S. dollars.