NEW YORK: The dollar surged to a four-year high against a basket of currencies and a two-year high against the euro on Tuesday after euro zone inflation fell in September, putting the greenback on track for its biggest quarterly gain in six years.
The Norwegian crown was another big mover, up 0.9 percent to a three-week high of 8.1084 crowns per euro after its central bank unveiled plans to buy 250 million crowns per day in October.
"U.S. data have been very supportive of the dollar against other major currencies," said Sireen Harajli, currency strategist at Mizuho Corporate Bank in New York.
The dollar index, which measures it against a basket of six major currencies, has gained almost 8 percent over the last three months, the biggest quarterly gain since 2008 and a record-breaking 11 successive weeks of gains. It was last up 0.4 percent at 85.93.
The U.S. economy will outgrow its counterparts in Japan and the euro zone for years as the Federal Reserve will likely raise interest rates by the second half of 2015 as its Japanese and European counterparts will likely embark on more stimulus, analysts said.
Data showed euro zone inflation slowed to 0.3 percent year-over-year increase in September from 0.4 percent the previous month, pushing the 18-nation block closer to deflation which the European Central Bank seeks to avert.
The divergence of monetary policy between the euro zone and the United States has helped increase the spread between the two-year U.S. Treasury yield and its German Counterpart to 65 basis points, close to the widest in seven years and bolstering the appeal of the dollar.
Earlier, the euro sank below $1.26 for the first time since September 2012, hitting a low of $1.25710 on the EBS trading platform. It was last down 0.5 percent at $1.2618.
The euro was on track to fall 9.4 percent against the dollar in the third quarter, its biggest quarterly loss since the second quarter of 2010.
The dollar inched up to another six-year high against the yen of 109.86 yen, and was last trading up 0.16 percent on the day at 109.67 yen.
Some analysts had cautioned that the dollar's three-month-long rally was at risk of running out of steam, particularly against the yen.
"It seemed overstretched at the moment," Harajli said.
The greenback was on pace to rise 8.3 percent versus the yen in the quarter, the biggest quarterly gain six quarters.
Tuesday's mildly disappointing U.S. data on housing, consumer confidence and Midwest business activity pushed the dollar off its earlier highs.
OTHER CURRENCIES
The rise in the Norwegian crown due to Norges Bank's sale of its foreign exchange reserves next month might not last in the long term, analysts said.
"In particular, the crown purchases could suggest that the Norwegian government is starting to run out of oil revenues to fund its expenditure," Valentin Marinov, head of European currency strategy at Citi in London.
Among other currencies, the New Zealand dollar edged up 0.1 percent at $0.7774 after losing 3.9 percent over the previous three sessions following data that showed that country's central bank weakened the kiwi in August. For the quarter, it has fallen over 11 percent, one of the weakest developed currencies in the third quarter.
The Hong Kong dollar stabilized after falling on Monday against the dollar on worries about how aggressively Beijing might deal with the pro-democracy protesters.
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