The dollar surged across the board on Wednesday as investors bought the US currency on strong expectations the Federal Reserve could raise interest rates more aggressively than previously thought.
The dollar built momentum against major currencies after Fed Chairman Alan Greenspan said on Tuesday the US central bank would do "what is required" to keep inflation in check.
The euro crashed below some key technical levels, breaking support around $1.21 and leading some analysts to forecast deeper euro losses.
"For the euro and for some of the other currencies that have been weakening against the dollar there is no obvious support. Global speculators had gone increasingly long euros against the dollar for the past two weeks," said Peter Frank, senior foreign exchange strategist at ABN-Amro Bank in Chicago.
"So it was clear that once you had a trigger such as Greenspan's fairly hawkish comments yesterday you get some unwinding of those positions and that is certainly what we have seen in the euro/dollar," Frank said.
The dollar fleetingly pared some gains against the Swiss franc and euro as the US Capitol and Supreme Court were briefly evacuated late in the day before authorities said it was a false alarm.
The dollar then regained much of the ground lost and remained steeply higher on the day.
By late in the New York session, the euro traded down a steep 1.7 percent against the dollar at $1.2044 weakening for the fourth consecutive session.
The euro was trading close to the 50-day moving average at $1.2040, noted Kenneth Landon, senior currency strategist with Deutsche Bank in New York.
"If we do break that (level), this thing does have scope to punch down to the $1.1800 level over a number of days," he said.
The dollar gained 1.4 percent against the Swiss franc to trade at 1.2544 francs.
The Australian dollar fell 1.4 percent against the US dollar to US $0.6899.
The Fed has held overnight rates at a 1958 low of 1 percent for a year, but is widely expected to raise them by a quarter percentage point when it meets on June 29-30.
A rise in US interest rates would make dollar-denominated assets more attractive, which could boost demand for dollars.
Japan's larger-than-expected upward revision to its first-quarter gross domestic product and the subsequent demand for yen pushed the dollar to five-week lows earlier in the global day at 108.67 yen.
But by late in New York the dollar had completely reversed against the Japanese currency, trading up 0.6 percent at 110.41 yen.
The euro fell sharply against the yen to touch session lows around 132.06 yen before trading at 133.04 yen late in New York.
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