The greenback strengthened against most of its 16 major counterparts after a Chinese manufacturing index dropped and Asian stocks fell, boosting demand for the refuge of the world's reserve currency. The yen was little changed versus the dollar on prospectsJapanis ready for sustained intervention to prevent gains in its currency that threaten an export-led recovery. The Australian dollar declined after the central bank cut its benchmark interest rate.
"It certainly is a worry just how weak the European economy is," saidJoseph Capurso, a currency strategist in Sydney at Commonwealth Bank of Australia, the nation's biggest lender. A European interest-rate cut "may happen next year. In the short term, you could certainly see euro falling further towards the $1.35 region."
The euro dropped 0.4 percent to $1.3806 as of 6:18 a.m. inLondonfrom yesterday inNew York, when it sank 2 percent, the sharpest slide since August 2010. The 17-nation euro slipped 0.5 percent to 107.82 yen. The dollar was at 78.11 yen from 78.17 yesterday when it touched 79.53, the highest since Aug. 4.
The Australian dollar slid 0.9 percent to $1.0436 and 1 percent to 81.49 yen. The MSCI Asia Pacific Index of shares lost 1.6 percent.