The dollar rose in the New York trade on Wednesday, climbing to a four-year high on an index that tracks the greenback against other major currencies, as the euro slumped beneath $1.28 on fresh signs of European economic weakness. After 10 straight weeks of gains through last Friday, the dollar index was last up 0.43 percent after touching a high of 85.09 last seen during July 2010.
-- Yen rally fizzles
The euro traded as low as $1.277 against the dollar, a 14-month low, and was last off 0.5 percent after European Central Bank President Mario Draghi renewed a pledge to keep monetary policy loose for an extended period. Data showing German business sentiment dropping for a fifth straight month and a warning by the Bank of Spain that Spanish private consumption growth was likely slowing also weighed on the euro.
The brightening US economic outlook, including a report on Wednesday that new home sales were up 18 percent in August, and Europe's sputtering business environment pointing to lower interest rates are widely credited for driving the dollar's extraordinarily long rally. "Most of the numbers coming out of Europe are weaker. Most of the numbers coming out of the United States are supportive," said Richard Franulovich, senior currency strategist at Westpac Banking Corp in New York. "I'd say the dollar is well positioned."
The Japanese yen rose early in the global trading day after Japanese Prime Minister Shinzo Abe voiced concern about the economic impact of the Japanese currency's fall to a six-year low. But it was last off 0.06 percent against the dollar at 108.96. Abe was quoted as saying he would carefully watch the impact of the yen's recent weakness on Japanese regional economies. His comments follow similar expressions of concern from two of his ministers after a drop of roughly 7 percent since early August. The yen touched a low of 109.46 yen per dollar last Friday.
Much as that seems broadly part of Abe's plan to refloat the Japanese economy by spurring inflation, market players said the speed of the fall may not be so easy for policymakers to digest. "It seems to us, and I think most people, that it's not the fact of the move, just the pace of it that Tokyo is concerned about," said a spot dealer with one large international bank in London.