The dollar soared on Tuesday, with analysts citing upbeat US housing data as an excuse for traders to drive the currency sharply higher in a technically driven and relatively illiquid session.
The dollar chalked up intraday gains of around 1 percent or more against the euro, yen and Swiss franc and scored a four-week high against the Australian dollar.
"There was a lot of technical activity that was the principal determinant of price action today," said Michael Woolfolk, senior currency strategist at The Bank of New York. "Technical activity usurped fundamentals, although that's not to say fundamentals aren't supporting the dollar."
A US government report showed that November housing starts beat market forecasts, which analysts said appeared to confirm that the US economy was fairly robust.
This laid the ground for heavy "stop-loss" trading, which quickly accelerated the dollar's upward momentum.
Stop-losses are automatic buy or sell orders triggered when a specific price is traded. With liquidity thinning out as year-end approaches and on a day when New York was hit by the city's first bus and subway strike in 25 years, it did not take particularly large orders to generate wild price swings and get momentum funds in on the move.
In late afternoon trading, the euro was down 1.2 percent from late Monday at $1.1860, and sterling was 0.5 percent weaker at $1.7530.
The dollar was up 0.9 percent against the yen at 117.10 yen and up 1.2 percent against the Swiss franc at 1.3090 francs.
In percentage terms, the dollar posted its biggest one-day rise against the Swiss franc in five months, while the euro's decline was its steepest one-day fall against the dollar in five months.
The dollar opened US trading on a firm footing. US economic reports on housing starts and inflation at the wholesale level provided more momentum.
The housing starts data were released at the same time as softer-than-expected wholesale price data for November. Neither report derailed expectations of more dollar-boosting interest rate increases.
Rising US interest rates have made the dollar more attractive in comparison with other currencies over the past year.
"I think the housing data continues to allay some of the worst fears on how the economy might slow, and has some impact on how the Fed may act next year," said Robert Sinche, head of global currency strategy with Bank of America, in New York.
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