The dollar rose more than half a per cent to four-week highs against the euro this morning, extending its recent recovery as traders turned their focus to US economic data and the interest rate outlook.
The dollar has been rising in the first few trading days of the year on robust US economic data and hawkish minutes from the Federal Reserve's latest meeting, pulling back from record lows against the euro set at the end of 2004.
The next key economic focus is the release of US jobs data tomorrow, as markets turn away from last year's favourite theory that the dollar needs to fall to attract funds to cover the huge US current account deficit.
"This is a continuation of the trend we have seen in the new year, together with a break of technical levels," said Daragh Maher, senior currency strategist at Calyon.
"We will need a good payrolls number tomorrow to validate these moves."
Early this morning the euro fetched around $1.3180, hitting its lowest since December 13th and down 2.75 per cent this year. The euro hit a record high around $1.3670 on December 30.
Several European countries are closed for a market holiday today.
The dollar was at 104.75 yen, up half a per cent from the US close and within sight of three-week highs set in the previous session. Against the Swiss franc, it was at its highest for 7 weeks.