The dollar headed for its biggest weekly gain versus the euro in more than three years on speculation Group of Eight finance ministers meeting this weekend will signal they favour a stronger US currency.
The single currency was also under pressure from the likely rejection of the Lisbon treaty by Irish voters.
The dollar remained higher after a US government report showed inflation accelerated in May, raising speculation the Federal Reserve will increase borrowing costs.
The yen was poised for a fifth weekly drop against the euro after the Bank of Japan left its target lending rate at 0.5 per cent, the lowest among industrialized nations.
The dollar increased 0.6 per cent to $1.5345 euro at 8.35am in London, from $1.5439 yesterday. The US currency rose 3 per cent to 108.23 yen, from 107.96. The euro fell 0.4 per cent to 166.07 yen, from 166.68.
Consumer prices rose 0.6 per cent in May after a 0.2 per cent increase the prior month, the Labor Department reported today in Washington.
Before the inflation report, the dollar had climbed 2.9 percent this week against the euro, the biggest increase since January 2005.
The US currency had risen 3.2 per cent versus the yen, the most since February 2004.
The yen was down 0.3 per cent versus the euro in its longest stretch of losses since October.
The Australian dollar was headed for a 2.8 per cent drop against its US counterpart, the biggest decline in almost three months, and the New Zealand currency was poised for a 2.8 per cent decline, its third consecutive decrease.
Bloomberg