The dollar surged to a three-month high against a currency basket on Thursday, buoyed by an upbeat tone from the Federal Reserve, while the euro tumbled on fresh concerns about Greece's waning fiscal health. In thin pre-holiday liquidity, the euro slid to its lowest against the dollar since early September, picking up pace after breaking support at $1.45 and hitting stop-loss sell orders to take it to near $1.43.
The dollar index, a gauge of its performance against six major currencies, rose to 77.823, its highest since early September. It was last up 0.9 percent on the day at 77.701. Concerns about fiscal troubles in peripheral eurozone countries gathered pace as Greece suffered the second downgrade of its credit rating in a week on Wednesday.
The euro fell around two US cents from late New York trade to $1.4330, according to Reuters data. By 1222 GMT it was at $1.4359, down 1.2 percent on the day. It also fell more than 1 percent against the yen to 128.93 yen. "The euro is suffering as a result of problems and debt issues relating to periphery eurozone countries which could pose a significant strain for the region," said Steve Barrow, currency strategist at Standard Bank, adding it could fall to $1.42 or $1.41 in the near term.
Greek assets took a lashing after Standard & Poor's cut Greece's rating by one notch to BBB-plus from A-minus late in European hours on Wednesday. The yield spread between 10-year Greek bonds and benchmark euro zone bonds rose to 269 basis points, the widest since early April, while Greek bank shares fell nearly 4 percent.
Other currencies also fell against the dollar, with sterling hitting a two-month low of $1.6080, and the Swiss franc falling to a three-month low of 1.0507 francs per dollar. The dollar briefly rose above 90 yen for the first time in nearly two weeks, but gains were capped by Japanese exporter orders near 90 yen, traders said.