The US dollar dropped against the euro and high-yielding currencies such as the Australian and New Zealand dollars on Wednesday on expectations the Federal Reserve would opt to pump more money into the US banking system. But the US currency also reached an eight-month high against the yen on bets the Bank of Japan will implement more aggressive monetary easing after an election on Sunday expected to yield a victory for the Liberal Democratic Party.

The euro rose for the third straight session, posting a 0.3 percent advance on Wednesday to $1.3040, well above a low of $1.2878 reached last week and holding gains made after better-than-forecast German economic sentiment data on Tuesday. The prospect of more monetary easing in Japan continued to hurt the yen, with the dollar rising to an eight-month high. It last traded at 83.13 yen, up 0.8 percent. The euro climbed to an eight-month high and was last up 1.1 percent at 108.41 yen.

Copyright Reuters, 2012