The dollar index scaled a three-week high on Thursday as a rout in commodities prompted an unwinding of dollar-funded bets on risky assets, a sell-off that dragged the euro to a six-week low versus the greenback. The euro fell as low as $1.41230, breaking below a key level at $1.4150, which technical analysts said leaves open the prospect of further falls towards $1.40.
However, traders said bids above $1.4100 could limit falls for now. Near term support is seen near its April 1 low of around $1.4060. The single currency was also weighed by eurozone periphery woes, as concerns increased that Greece's debt burden may be unsustainable. The euro also hit a six-week low against the yen. The Australian dollar and other commodity currencies did not react to China's move to increase reserve ratios, although analysts warned this could add to the risk-off attitude in markets.
Steep losses in commodity prices - with silver tumbling more than 7 percent and oil down around 2.3 percent after falling overnight - as well as weak equities encouraged traders to cut exposure to riskier currencies. The dollar index rose as high as 75.645, its strongest in more than three weeks, taking it well above a three-year low of 72.696 hit only last week.
A broad recovery in the dollar also pushed it to a one-week high against the yen of 81.35 yen before it slipped back to trade at 80.90 yen. The dollar was also near a three-week high against the Swiss franc at 0.8882 francs. The euro was last down 0.3 percent against the dollar at $1.4162, while against the yen, the common currency fell as low as 114.178 yen, its weakest since March 24. "Loss of risk appetite is also hitting the euro. A lot of people had got very long of euros on the back of expectations for higher eurozone rates," said Michael Hewson, currency strategist at CMC Markets.
Some analysts pointed to a strengthening correlation between silver prices and the euro which could mean further falls in silver would be a warning sign for a further downward correction in the shared currency. Among commodity-linked currencies, the Australian dollar was particularly weak, tumbling more than 1 percent to a one-week low of $1.0568 after surprisingly weak Australian jobs data reduced market expectations of a rate hike.