The dollar extended its recent gains against the euro into a fourth straight session on Tuesday, shrugging off an earlier bout of profit-taking as markets remained focused on rising US rate hike expectations.
The Paris-based Organisation for Economic Co-operation and Development added the latest fuel to rate views, saying in its semi-annual report that the Federal Reserve should start raising borrowing costs in the next few months.
With the lingering glow of last Friday's surprisingly strong US jobs report, this helped keep investors' minds on prospects that the US economy had strengthened enough to warrant a rise in federal funds rate from its current 46-year low.
"We are just seeing more dollar strength. People do not want to stand in the way of sentiment. As soon as the euro started to slip back, the market saw it as a bit of a failure, with the help of sterling going down as well," said Ian Gunner, head of foreign exchange research at Mellon Financial Corporation.
At 1150 GMT, the dollar traded at $1.1795 per euro, a third of a percent stronger from its previous New York close.
Earlier in the session the greenback weakened to $1.1890 as markets cashed in on the more than two cents of gains it has seen against the euro in the aftermath of Friday's US jobs data.
The dollar traded steady at 113.76 yen. The Japanese currency had earlier found some support after Tokyo shares snapped a six-session losing streak, but the greenback remained close to Monday's peak of 114.14, its strongest since September.
The greenback also reversed earlier losses to stand firmer on the day against the Australian and New Zealand dollars.
Meanwhile sterling took a beating at the hands of both the euro and the dollar after news that British manufacturing output staged a surprise fall again in March.
The OECD's chief economist Jean-Philippe Cotis called on the US to cool its economy sooner rather than later and said a June rate hike was a reasonable time to start tightening.
"For the US, the main risk is that macroeconomic policies remain too expansionary too long during the upswing," he told Reuters in an interview.
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