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 The Norwegian crown was another big mover, up almost 1 percent to
a three-week high of 8.1045 crowns per euro after its central bank
unveiled plans to buy 250 million crowns per day in October.
The dollar index, which measures it against a basket of 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.
Many analysts believe that is the beginning of a potentially seismic
shift in the financial status quo, based on expectations that the
U.S. economy will outgrow its counterparts in Japan and the euro
zone for years, pushing its interest rates higher.
In the flagging 18-nation European bloc, data showed inflation
falling to 0.3 percent in September from 0.4 percent the previous
month, even further into the European Central Bank's "danger zone"
of below 1 percent, and a far cry from its target of below, but
close to, 2 percent.
"The euro zone number might have been the catalyst that got things
moving, but the dollar would have been higher even in the absence of
the data," said Adam Cole, global head of currency strategy at RBC
Capital Markets.
The euro sank below $1.26 for the first time since September 2012,
hitting a low of $1.25715 on trading platform EBS, down almost 1
percent on the day.
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 66 basis points,
close to the widest in seven years and bolstering the appeal of the
dollar.
Cole said month-end flows out of equities were also helping the
dollar. The dollar index gained 0.7 percent to hit 86.207, its
highest since the middle of 2010.
NORWEGIAN MOVE
Valentin Marinov, head of European currency strategy at Citi in
London, said the announcement that the central Norges Bank would be
selling billions of its foreign exchange reserves next month would
support the Norwegian crown for now but not necessarily over the
longer term.
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"While the crown should remain supported by the Norges flows, the
macro implications may be less supportive than it seems. In
particular, the crown purchases could suggest that the Norwegian
government is starting to run out of oil revenues to fund its
expenditure," he said.
The Swiss franc, another ultra low-yielding currency with little
prospect of inflationary pressure on the horizon, was also among the
biggest losers against the dollar, down 0.8 percent at 0.9586 francs
per dollar.
Some analysts had earlier cautioned that the dollar's
three-month-long rally was at risk of running out of steam for now,
particularly against the yen.
"It's really hard to pick a bottom, but it does look to us like it's
gone a little too far, and has overshot," said Sue Trinh, senior
currency strategist at RBC Capital Markets in Hong Kong.
The dollar inched up to another six-year high against the yen of
109.75 yen, and was last trading up 0.2 percent on the day at 109.70
yen, up almost 5 percent for the month.
(Additional reporting by Patrick Graham in London, Lisa Twaronite in
Tokyo and Ian Chua in Sydney; Editing by Mark Trevelyan)
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