The dollar extended gains against the yen today as jitters eased about the US economy encouraging investment in US assets, but dealers remained cautious ahead of a key consumer confidence survey later in the session.
The euro fell briefly below 90 US cents yesterday for the first time since September's terrorist attacks on the US.
The dollar has scooped its biggest weekly gains since May in trade-weighted terms this week as US equities rebounded to pre-September 11th levels, easing pessimism about the possible fallout of the US economy from last month's attacks and the ensuing US-led strikes on Afghanistan.
Yet analysts warned this did not mean the risk is gone, thus keeping an wary eye on a US consumer sentiment survey and retail sales data for more clues about the state of the economy.
The dollar leapt to a fresh one-month high of 121.74, on top of its full-yen rise today.
On the FINEX trade weighted index, the dollar has erased all its losses since September 11th. It has also retraced nearly 40 per cent of its drop from a 15-year high hit in early July, illustrating its broad-based recovery.
The euro won some respite but analysts say confidence in the currency was sorely tested after the European Central Bank disappointed the market by leaving interest rates steady in the previous session.