The dollar extended its rally against a basket of currencies on Wednesday to touch a five-month high, supported by relatively strong US economic data in recent days, while the euro was hit by reports that a likely future Italian government would seek debt forgiveness from European creditors.
The dollar index, which measures the greenback against a basket of six other currencies, was up 0.14 percent at 93.352, after rising as high as 93.632, its highest since December 19. The greenback has risen about 1.6 percent this month, boosted by a view that the Federal Reserve will outpace most major central banks in policy normalization.
"There's been some improved sentiment on conditions in the US compared with other parts of the world," said Sireen Harajli, foreign exchange strategist at Mizuho in New York. US factory output rose in April, although new estimates of manufacturing and overall industrial production showed less growth in prior months than initially believed.
The US currency got a boost on Tuesday when strong US consumer spending numbers sent 10-year Treasury yields surging to a seven-year peak of 3.095 percent. The euro was 0.25 percent lower against the greenback at $1.1807, its lowest since December, after reports that Italy's anti-establishment 5-Star Movement and anti-immigrant League may ask the European Central Bank to forgive 250 billion euros ($294.18 billion) of debt.
The euro was 0.4-percent lower against the Swiss franc, after dropping to a five-week low of 1.1772 francs. The Swiss franc typically attracts capital in times of uncertainty. Against the yen, the dollar was down 0.11 percent at 110.22 yen, but still close to the highest it has been since early February.
Sterling fell towards its lowest point of the year against the dollar amid fresh worries about Britain's Brexit negotiations and relatively modest UK wage growth, but pared losses to trade little changed on the day at $1.3495.
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