The dollar tumbled to its lowest in two weeks against the euro and yen on Friday after a Federal Reserve official's comments raised doubts over how quickly the US central bank would raise interest rates.
Federal Reserve Board Governor Ben Bernanke said yesterday the bank should be able to push interest rates up at a gradual pace, wrong-footing many in the market who had bet on aggressive rate increases to cool the fast-growing US economy.
With expected returns on US deposits looking less appealing, investors bailed out of long dollar positions, pushing the greenback lower across the board.
This morning the dollar was down 0.8 per cent at 111.83 yen and over half a per cent lower against the euro, at $1.2030.
Sterling also rose to a two-week high above $1.7950 as strong mortgage lending data bolstered market expectations that British interest rates would rise several more times over the year.
British mortgage lending rose £6.4 billion in April, its fastest pace since the British Bankers' Association records began in 1997.