After a week of worries over debt of smaller euro zone countries, White House plans to limit risk-taking at US banks, credit tightening steps in China and a slide in global stock markets, investors have cut risk trades funded by the yen and dollar.
Traders said there was talk of loss-cutting sell orders on the euro below $1.3890-80, just below the day's trough at $1.3912, but that its dip to a fresh low in early Asian action had cleared out many sell orders against the yen for now.
The US economy is expected to have grown at an annualised 4.6 percent in the fourth quarter, double the rate in the third quarter when the economy resumed expansion after four consecutive quarters of decline. The dollar index, a measure of its performance against six other major currencies, touched a five-month high at 79.156. It reached above its 100-week moving average of 78.94, and a weekly close above there will be a bullish signal.
The euro fell 0.3 percent from late US trade to $1.3932, recovering slightly from an early drop to $1.3912 on trading platform EBS, its weakest point since mid-July, as investors worried Greece may not be able to service its debt. It is on track for a loss of about 2.5 percent this month although not as steep as December, when it fell 4.5 percent.
It also tumbled against the Swiss franc, dropping to 1.4645 francs, its lowest since last March, the month the Swiss National Bank intervened to counter franc strength. Traders said there was talk of a barrier targeted down at 1.4650 francs, but the market is wary of the possibility of franc selling by the Swiss central bank and it recovered to 1.4668 francs later. The central bank was reported as saying last week it would prevent any excessive rise in the franc.
Germany and France denied a report suggesting an imminent European Union bailout for Greece, while Athens said it had not requested help and was the victim of speculators intent on attacking it as the euro zone's "weak link". The euro fell 0.3 percent to 125.26 yen, pulling back up from a nine-month low of 124.81 yen hit on EBS.
The next chart focus is its April trough of 124.38 yen, traders say, although its 14-day relative strength index has dropped to 26, signalling selling on the pair is now quite stretched. A reading of 30 or below signals a pair is oversold and above 70 that it is overbought.