The dollar surged today after a senior Federal Reserve official hinted the United States could accelerate the pace of raising interest rates and Washington pledged for a tighter budget and strong dollar policy.
St Louis Federal Reserve President Mr William Poole said that the central bank would not hesitate to depart from its pace of measured interest rate increases if necessary.
The dollar rose to $1.3057 per euro this morning, up more than 1 per cent from late New York levels last night.
"The latest surge in the dollar came after comments from Poole, who suggested the Fed could raise rates more and faster than expected," said Mr Carsten Fritsch, currency strategist at Commerzbank in Frankfurt.
President George W. Bush said in an interview yesterday that the budget he proposes next month will freeze spending for some programmes and deny funding to others to meet his deficit reduction goals.
He repeated the administration's strong dollar policy and said he was confident foreign investors would find the US a good place to invest.