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The euro fell to $1.2035 on trading platform EBS,
its lowest since June 2010, and last traded at $1.2045, down 0.5
percent on the day. The single currency was also hurt by
disappointing euro zone manufacturing data.
In an interview with the German financial newspaper Handelsblatt,
ECB President Mario Draghi said the central bank was less likely
to preserve price stability than it was six months ago,
suggesting it was ready to act early this year.
"The risk is on the downside for the euro after the comments
from Draghi. It could break below $1.20 since there is a risk of
a very low inflation reading out of the euro zone next week,"
said Niels Christensen, an FX strategist at Nordea. "That will
just add to pressure on the ECB to take measures when it meets
later this month."
The euro zone is expected to report next week that consumer
prices fell 0.1 percent in December after rising 0.3 percent a
month ago, taking it further below the ECB target of just under
2 percent.
Sterling slid to a 17-month low of $1.5420 after data showed
British manufacturing expanded less than expected in December.
Meanwhile, the index that measures the dollar against a basket
of currencies rose to 90.766, its highest level since March
2006. That extended its gains in 2014, when it rose nearly 13
percent, the best annual performance since 1997.
"Many of the themes that were in vogue heading into the end of
the year remain very much firmly in place," said Callum
Henderson, global head of FX research for Standard Chartered
Bank in Singapore. "The U.S. recovery is not stellar but it's
certainly materially better than in most places in the G10."
The contrast between the U.S. Federal Reserve's path toward rate
increases and looser policies in Europe and Japan boosted the
dollar last year.
Against the yen, it rose 0.6 percent to 120.50 yen, having hit a
seven-year high of 121.86 yen in early December.
In the U.S., final manufacturing PMI for December and the ISM
manufacturing index will be released later on Friday. A
better-than-expected number could strengthen the dollar further.
(additional reporting by Masayuki Kitano; editing by John
Stonestreet)
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