The dollar jumped to a two-month high against the yen and rallied across the board on Thursday as mounting expectations of higher US interest rates lured investors away from emerging market currencies.
The dollar's gains came after data showed a surge in the current account deficits of New Zealand and South Africa, prompting investors to dump both currencies and helping to drag the Turkish lira to a three-year low.
The dollar benefited as 2-year Treasury yields surged to their highest since December 2000, reflecting speculation the Federal Reserve could raise interest rates by as much as a half percentage point next week.
The Japanese currency slumped to a record low against the euro and fell sharply against the dollar, hurt by persistent speculation that Bank of Japan Governor Toshihiko Fukui may resign over an investment scandal.
The yen was also dogged by continued worries over signs that North Korea is preparing to test a long-range missile.
The dollar surged to a 2-1/2 year high against the rand after data showing South Africa's current account deficit swelled to its widest in 24 years.
Investors also dumped the kiwi dollar after New Zealand's first-quarter current account deficit hit a record, driving the currency to its lowest in more than two months against the US dollar in its biggest daily fall in three months.
"There has been risk-aversion in some of these emerging markets, and you can see why the dollar is gaining against the kiwi and the (South African) rand," said Tim Mazanec, senior currency strategist at Investors Bank & Trust in Boston. Against the dollar, the euro fell to $1.2575, down 0.7 percent in late New York trade, having earlier hit a two-week high of $1.2680. The New Zealand dollar dived 1.8 percent to $0.6090.
The dollar shot up 1.1 percent to 116.15 yen, its biggest daily rise in a month, after surging to just below 116.30 yen, its highest in two months. The euro climbed half a percent to 146.15 yen and touched 146.30 yen, the highest level since the euro was launched in 1999.
Fukui told a parliamentary committee on Thursday that he wanted to stay on as governor and apologised in the face of harsh criticism over an investment years ago with a disgraced financier under arrest on suspicion of insider trading.
The yen was also under pressure after Fukui said that the central bank had made clear it would not raise interest rates quickly from virtually zero, the lowest in the developed world.
Sterling tumbled 1 percent to a seven-week low against the dollar, trading at $1.8280, after the sudden death of Bank of England Monetary Policy Committee member David Walton, the sole British policy-maker to back higher interest rates for the past two months.
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