Evidence of further weakness in the US economy and renewed speculation that the Federal Reserve is about to restart its policy of "quantitative easing", the direct injection of electronic money into the economy, sent the dollar crashing though a range of benchmarks and records yesterday.
The dollar hit a 15-year low point against the yen and a near nine-month trough against the euro, helping to drive gold to a new record. An unusual triple dollar parity also loomed over markets, with the Australian and Canadian dollar at, or close to, parity with their American counterpart. The Australian dollar soared to a 28-year peak.
A decision by the Singaporean authorities to widen their currency's trading band, in effect allowing a revaluation, propelled the Singapore dollar to an all-time high against the greenback.
Sterling, too, rose, reaching an eight-month high against the dollar. But it was relatively weak against the euro; as with the US, markets are starting to price in a further round of QE. In both countries, this implies even lower interest rates, an increase in supply against other currencies and gold, and adds to fears in some quarters about inflation.
Speculation that the Fed was ready to intervene has been heightened since its chairman, Ben Bernanke, spoke about the option at the Jackson Hole conference of central bankers earlier this year. Minutes of the last Federal Open Markets Committee meeting, published on Tuesday, revealed new enthusiasm for "printing money".
"Many participants noted that if economic growth remained too slow to make satisfactory progress towards reducing the unemployment rate, or if inflation continued to come in below levels consistent with the FOMC's dual mandate, it would be appropriate to provide additional monetary policy accommodation," the minutes said.
Almost on cue, the weekly new jobless claims data released in Washington yesterday showed a higher-than-expected leap of 13,000 last week, to 462,000. That is well above the 450,000 claims expected by economists and above the level needed to indicate falling unemployment – a key factor in Fed thinking. Equities also fell, as part of a more generalised "flight from risk".
Investors are also acutely aware that the "currency wars" now threatening to break out across the world will also require the US Fed to intervene heavily to keep the dollar competitive against the Chinese yuan, the euro and the yen.