LONDON: The euro crashed through support levels that have held for more than a month on Wednesday, hitting a six-week low under pressure from the imminent launch of outright quantitative easing by the European Central Bank.
The dollar, bolstered by rises in US government bond yields this week, hit its highest since September 2003 against the basket of currencies used to measure its broader strength.
There has been more momentum behind the greenback in the past week after a month of mediocre data which had left it struggling to build on six months of gains against most major currencies.
Dealers said further gains against the euro on Wednesday were likely to depend more on a rash of US sentiment data due later in the session than the ECB's policy meeting on Thursday.
"It’s really the dollar side of the equation that is at stake at the moment," said Daragh Maher, a strategist with HSBC in London.
"The ECB has told us what it is going to do so in that sense the euro is on autopilot; it is hard for the (European) data to change anything."
The euro was down 0.5 percent at $1.1121. The dollar index was up by a third of a percent at 95.730.
Other moves saw the Swedish crown rise to a three month high of 9.2280, adding to gains in the previous session after deputy central bank governor Kerstin af Jochnick said there was a risk of crown gains due to the ECB's planned QE scheme.
The crown was up 0.3 percent on the day against the euro, but a touch lower against the dollar at 8.2760.
The dollar index has gained about 5.7 percent so far this year, helped by the US economy's better performance against other major world economic regions and relatively higher US interest rates.
Its rise has slowed over the past month or so, however, as investors has seen fewer catalysts to move the dollar higher given the uncertainty over whether the US Federal Reserve will start raising interest rates by mid-year or wait a while longer.
Against the yen, the dollar held steady at 119.75 yen. Earlier on Wednesday, the dollar had slipped to an intraday low near 119.50 yen, down from Tuesday's high of 120.27 yen, its highest level in nearly three weeks.
A decline in Japanese equities on Wednesday and the previous day's drop in US shares were tempering risk sentiment and helping to weigh on the dollar versus the yen, said a trader for Japanese bank in Tokyo.
The Australian dollar got a slight lift as the market took comfort in data showing the economy grew as expected last quarter, when the risk had been for a softer outcome.
The Aussie dollar touched an intraday high of $0.7835 after the data but later eased off that peak and last stood at $0.7812, down 0.1 percent on the day.
"Australian GDP data were a bit softer than expected but that was due to inventories and not a reason for fresh bearishness," said Kit Juckes, a strategist with Societe Generale in London.
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