The dollar rose 1 percent against a basket of currencies on Tuesday, extending gains since a rise in U.S. core inflation last Friday and driving the euro briefly below $1.09 for the first time in a month.
Against the yen, it broke through longer-term resistance to hit an eight-year high of 122.88 yen, and a number of analysts were optimistic of a push back towards 12-year highs below $1.05 per euro hit in March.
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In the first proper trade in London since a long holiday weekend, some pointed to growing nerves over Greece, as well as a fall-back in German government bond yields that has made the dollar relatively more attractive compared to the euro.
But whether the U.S. currency is ready for an attack on parity with the euro in the weeks ahead is likely chiefly to depend on the next rounds of U.S. economic data improving after a disappointing first quarter.
"I think this has turned around and the dollar is back on a bullish trend," said Ian Stannard, head of European FX strategy with Morgan Stanley in London.
"The adjustment has now been completed and the dollar can now react to any positive news. Dollar yen breaking through the top of the range is an important event."
The dollar index last traded at 96.850 after reaching a one-month high of 97.121. It stood at $1.0926 per euro, up half a percent on the day, having hit a high of $1.0885.
Doubts over whether the U.S. Federal Reserve can raise interest rates this year have been at the heart of a rough few weeks for the dollar and Fed Chair Janet Yellen steadied the ship on Friday by reinforcing the U.S. central bank's tightening bias.
But the first indications of economic growth in April have also been mildly disappointing, even as underlying inflation showed some signs of life. Durable goods numbers as well as a flash PMI sentiment indicator are due later on Tuesday and not everyone was so optimistic as to what they would show.
"With data feeding into Q2 GDP showing some signs of weakness, the risk may be on the downside for USD on a disappointment which would validate market concerns on slowing," Citi strategist Josh O'Byrne said in a morning note.
Against the yen, the dollar traded up 0.8 percent, having hit an 8-year high of 122.88 yen.
The Swiss franc was another winner from the euro's weakness, rising to its strongest in three weeks at 1.0324 francs per euro. (Additional reporting by Shinichi Saoshiro in TOKYO; Editing by Mark Trevelyan)