The US dollar exited the week on strong footing Friday, hitting 13-month highs versus its European rivals and a 10-month peak against the yen.
The US currency rallied as positioning ahead of the long US holiday weekend combined with positive economic data and residual effects from the Federal Reserve's rate increase on Thursday to boost the dollar.
The dollar's advance pushed the euro to a new 13-month low and brought the single currency well under the psychologically significant US$1.20 barrier. The dollar also hit a new 10-month high versus the yen and 13-month highs against the pound and Swiss franc.
In late New York trading, the euro was at US$1.1948, close to its intraday lows of US$1.1940 and down from US$1.2102 late Thursday. The dollar continued to gain on the yen, hitting a new 10-month high of ¥111.79 before dropping slightly to ¥111.75 at the session exit from ¥110.88 late Thursday.
The dollar also gained on the Swiss franc and was at SF1.2972 from SF1.2811 late Thursday. The British pound was at US$1.7694 from US$1.7906 and the euro was at ¥133.53 from ¥134.23.
The dollar extended its advance from late Thursday, after the Fed raised rates by a quarter percentage point to 3.25 percent and knocked away any ideas that it might be nearing the end of it's tightening campaign.
Additional dollar gains came Friday following the Institute for Supply Management's report in the New York morning. The closely watched manufacturing index for last month moved to 53.8, after 51.4 in May and 53.3 in April, and was above the market consensus of 51.5.
Market analyst continued to cite the Fed statement from Thursday as the main force driving the dollar. The rate increase in the US comes at a time when the future of interest rates decisions from both the Bank of England and the European Central Bank are unclear.
"The Fed was slightly more hawkish, and at the same time, the UK is calling for rate cuts. It seems the interest rate cycle right now is favoring the dollar," said Tim O'Sullivan, chief trader at Gain Capital.
Add to that the positive economic data and investors positioning before a long holiday weekend in the US, and the market was ripe for large movements, he said.
Although the Fed's current policy stance has broadly been seen as dollar positive, markets have been heavily influenced by technical factors which have been behind some of the sharp and erratic market movements in recent days.
The yen is a clear case where technicals have been driving the levels, said Steve Saywell, chief currency strategist at Citigroup in London. But he added there are some strong fundamentals now in the market that will have a positive influence on the dollar in the short term.
"Certainly the focus has been on sterling, where the economic shine is diminishing," Saywell said.
Saywell recently adjusted the forecast for the rate change in the UK, calling for a "more aggressive rate cut, which could come as early as next week."
Meanwhile, the University of Michigan's final report on US consumer sentiment for last month also helped the dollar on Friday. The index rose to 96.0 from 86.9 at the end of May.
The increase was above expectations of a 94.8 reading at the end of last month, according to a survey of 18 economists by Dow Jones Newswires and CNBC.