The dollar hit a two-year high against the euro on Tuesday and held near a 26-month peak versus the yen as investors bet higher US interest rates meant yield differentials would widen in favour of the greenback.
The spread of social unrest in France and pressure from European politicians on the European Central Bank not to raise interest rates in a hurry also undermined sentiment in the single currency.
With little major economic data due later in the day, euro selling snowballed after breach of a key technical level at around $1.1750 per euro. "Sentiment is quite positive for the dollar. We are breaking levels so short term there is momentum. Fundamentally we are looking at interest rates," said Bilal Hafeez, currency strategist at Deutsche Bank.
By 1250 GMT, the euro was down 0.6 percent at $1.1742 after hitting a two-year low of $1.1711. The euro was down half a percent at 138.14 yen. The dollar was steady at 117.68 yen, off its two-year high of 118.38 set on Monday.
The euro came off the day's low, rising about 30 ticks, after hawkish remarks on interest rates by ECB governing council member Yves Mersch. Asked whether a December rate rise was possible, Mersch told reporters: "That's what he (ECB President Jean-Claude Trichet) said. I don't make any other comment beyond what the introductory statement said."
Another ECB policymaker, Nicholas Garganas, took a cautious stance, telling Reuters the ECB needs convincing evidence that inflationary risks will materialise before raising interest rates. He also said the euro's recent slump against the dollar is no cause for concern and it could even help euro zone exports. Analysts say the euro's next support is not seen until $1.1640 then $1.1580.
Youths rioted across France overnight, torching more than 1,000 vehicles, despite government plans to impose curfews to quell almost two weeks of unrest.