NEW YORK: The dollar rose against major currencies on Wednesday, reaching an eight-year peak against the yen on expectations the Federal Reserve would raise interest rates later this year due to signs the U.S. economy is recovering from an anemic first quarter.
The dollar's gains were also fed by automatic sell orders for the yen which had traded in a relatively tight range versus the greenback, traders said.
"We broke out of a technical pattern because of the general dollar strength," Marc Chandler, chief global currency strategist at Brown Brothers Harriman & Co. in New York, said of the Japanese currency.
Japanese Economics Minister Akira Amari said earlier Wednesday while recent movements reflected the dollar's gain rather than the yen's fall, excessive currency moves were undesirable, echoing earlier signals from the finance ministry and Bank of Japan.
Traders brushed off Amari's comments with the dollar touching an eight-year high of 123.78 yen in early U.S. trading on the EBS trading system. It last traded up 0.5 percent at 123.66 yen.
Meanwhile, the euro slid to an one-month low versus the greenback, wiping out its earlier gains, on the revived view that the U.S. currency would push toward parity.
European Central Bank's plan to accelerate its bond purchases for its 1.1 trillion euro quantitative easing has overshadowed the reduced pessimism on the euro zone and exerted pressure on the euro, analysts said.
The absence of a deal between Greece and its creditors underpinned the selling the euro, even as European officials have downplayed the chances the cash-strapped nation will default.
The euro was last down 0.1 percent at $1.0863 after touching one-month low of $1.0819 earlier on the EBS platform.
Renewed enthusiasm in the greenback boosted the dollar index to its highest in more than a month at 97.775. It was last up 0.2 percent at 97.471.
Tuesday's better-than-expected U.S. data on core business spending, new home sales and consumer confidence failed to renew bets the Fed would end its near zero rate policy at its June meeting, but they supported the notion it would do so by year-end, analysts said.
"The underlying theme is of dollar strength. Perhaps June has gone out of the window but I think the market is more and more comfortable with the idea that rates will rise later in the year," said Neil Mellor, a Bank of New York Mellon strategist in London.
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