The dollar rolled higher across the board on Monday, hurting high-yielding currencies and pushing the yen to an eight-month low as accelerated expectations of higher US interest rates gripped the market.
With the focus firmly on US rates, traders' attention was turning to talks by Federal Reserve officials for clues on the timing of an interest rate hike.
An appearance by Chicago Federal Reserve President Michael Moskow on Monday produced no market-moving remarks, and traders were looking ahead a speech Moskow was to give on the economy on Tuesday. US Treasury Secretary John Snow was slated to speak at 12:30 pm EDT at (1630 GMT) on Monday.
"It's interest rates affirming the (dollar's rally). The question is 'How far are we going to go?'" said Tim Mazanec, senior currency strategist with Investors Bank & Trust in Boston.
The euro fared better than the yen, which fell more than 1 percent to its lowest level since a G7 call last September for more exchange rate flexibility. But the euro was still close to a recent 5 -1/2 month trough.
Sparking the dollar's rally was Friday's unexpectedly strong US non-farm payrolls report showing 288,000 new jobs created in April. That heightened market speculation the Federal Reserve could raise interest rates from just 1.0 percent as soon as June.
The yen was stung by tumbling stock prices. The Nikkei stock average ended 4.84 percent lower as investors pulled out on the prospect of higher US rates, concerns of potential economic slowdown in China and a security warning at the US mission in Tokyo. In the United States, the Dow Jones industrial average fell to multi-month lows below the 10,000 mark, down about 1.7 percent, but the dollar shrugged that off.
"Dollar/yen is now heading significantly higher. The interest rate differential between those two countries really bodes significantly higher for the dollar" as Japanese investors buy higher-yielding US fixed income assets, said Tim O'Sullivan, trading manager with Gain Capital in Warren, New Jersey.
By late morning in New York, the euro was around $1.1827, according to Reuters data, off about 0.48 percent.
The next key support level for the euro lies between $1.1750 and $1.1760, analysts said. A decisive fall below that zone could set analysts marking down their forecasts.
Against the yen, the dollar climbed to 114.00 yen, up about 1.5 percent. The euro was at 134.91 yen up about 1.1 percent.
Against the Swiss franc, the dollar was nearly flat at 1.3013 francs. Sterling was down 0.7 percent to $1.7738.
Traders cited a reversal of "carry trades" in which investors had previously borrowed in low interest rate currencies in order to buy higher-yielding bonds in others. As a result, some high-yielding were currencies down sharply.
The Australian dollar lost about 1.4 percent against the US currency, trading around US $0.6915.
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