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Singapore - The dollar slumped against the euro and yen in Asian trade on Friday as traders sold off the safe haven currency to snap up stronger units on the last day of 2010, analysts said.
Japanese markets were closed Friday for public holidays.
A euro bought $1.3291 in afternoon Asian trade, up from $1.3286 in New York on Thursday. The European currency bought ¥108.32 from ¥107.78 a day earlier.
The greenback was also down against the yen, trading at ¥81.49 compared with ¥81.55 in US trade on Thursday.
Fund managers were selling the dollar and snapping up stronger currencies like the Aussie dollar to make their portfolios look more attractive to investors before the year closed, said Jasmine Poh, Asian forex strategist for BNP Paribas in Singapore.
"Year-end window dressing tends to benefit the riskier currencies," she said.
Window dressing describes the practice of selling off loss-making financial instruments and buying booming ones near the end of a financial year or quarter in a short-term bid to improve the look of a portfolio's performance report.
Poh added that the foreign exchange market was also getting pre-emptive jitters over Federal Reserve chairperson Ben Bernanke's testimony on the US economic outlook before the Senate Budget Committee on Friday next week.
"He is expected to reiterate the pumping in of the QE (quantitative easing) and that's bearish to the market," she said.
The Fed on November 3 decided to pump an additional $600bn into the financial system in an attempt to bolster the fragile US recovery, but critics said the move would weaken the greenback and lead to soaring inflation.
The US dollar was largely lower against Asian currencies, trading at $1.2860 Singapore dollars from $1.2915 on Thursday, and 43.77 Philippine pesos from 43.79.
It traded at $29.14 Taiwan dollars from $29.21 on Thursday, and 30.06 Thai baht from 30.14.
However, the dollar strengthened against the Indonesian currency, with a dollar buying 8 990.00 rupiah from 8 980.75.
