LONDON: The euro slid to a 27-month trough against a buoyant dollar on Wednesday, a day ahead of a crucial European Central Bank meeting that could pave the way for more easing measures in the euro zone.
The greenback also hit a seven-year peak against the yen, boosted by comments from US Federal Reserve officials who painted an upbeat picture of the US economy despite falling oil prices, prompting a ramping up of expectations of a mid-2015 interest rate rise.
Those gains helped the dollar hit its strongest point since March 2009 against a basket of major currencies at 88.867.
New York Fed President William Dudley reiterated on Tuesday that for now the dramatic drop in oil prices - down more than 30 percent since June - was a net benefit for the United States, helping US consumers and major trade partners.
"The balance of Dudley's comments suggest he's playing down the global environment and he was much more keen on emphasizing the positive impact on growth from falling," said Derek Halpenny, European head of global markets research at Bank of Tokyo-Mitsubishi UFJ in London.
"The 'considerable time' phrase ... is certainly under threat and in that environment there's not going to be much appetite for selling into the dollar," he added, referring to a phrase used by the Fed to describe when rates will rise.
Halpenny said the euro, which fell 0.4 percent to $1.2331 , its weakest since late August 2012, could rebound on Thursday if the ECB fails to announce any new measures to shore up the struggling euro zone economy and ward off the threat of deflation. The dollar climbed to 119.44 yen on trading platform EBS, its strongest level since August 2007.
The dollar last traded near 119.35 yen, up 0.1 percent on the day.
"In terms of flows, overseas (non-Japanese) players seem to be buying (dollars against the yen) aggressively on dips," said a trader for a Japanese bank in Singapore.
The greenback also rose against the Australian dollar, which slid to a 4-1/2-year low of $0.8388 after data showed Australia's economy unexpectedly slowed last quarter, prompting markets to price in more chances of an interest rate cut.
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