The U.S. dollar hit a fresh high since March 2017 against the yen and traded close to a 16-month peak versus a basket of major peers on Wednesday, as a run of strong economic data boosted bets for earlier Federal Reserve interest-rate hikes.
Australia's dollar weakened after wage data failed to strengthen the case for tighter monetary policy.
The greenback rose as high as 114.975 yen before last changing hands at 114.755.
The dollar index — which measures the currency against six rivals including the yen — traded at 95.871, not far from the overnight high of 95.978, a level not seen since July of last year.
U.S. retail sales rose more than expected in October, a report showed Tuesday, building on momentum from last week when data showed consumer prices surging at the highest rate since 1990.
St. Louis Fed president James Bullard said on Tuesday that the central bank should "tack in a more hawkish direction" over its next couple of meetings to prepare in case inflation does not begin to ease.
Money markets are currently pricing in a high probability of a Fed rate increase in June, followed by another in November.
"The U.S. economy looks to have shaken off the delta soft patch and is regaining forward momentum, albeit with heavy ongoing supply chain issues and reopening bottleneck," Westpac strategists wrote in a client note, recommending buying the dollar index on any dips into the low 95 level.
"Hawkish comments from Bullard - voter next year — will leave markets comfortable pricing in Fed hikes (in) 2022, a stark contrast with Europe where renewed virus suppression measures are being implemented."
The euro languished near a 16-month low to the dollar as Europe suffered from worries about growth amid a renewed surge in Covid-19 cases.
Germany's parliament is due to vote on Thursday on stricter measures to deal with the outbreak, while Austria imposed a lockdown on unvaccinated people at the start of the week. France, the Netherlands and many countries in Eastern Europe are also struggling to contain infections.
European Central Bank President Christine Lagarde speaks later on Wednesday, after saying on Monday that tightening monetary policy now to rein in inflation could choke off the euro zone's recovery.
ECB board member Isabel Schnabel also speaks at a separate event.
One euro last bought $1.13245, mostly flat from Tuesday, when it dipped as low as $1.1309 for the first time since July 2020.
In contrast, sterling was firm after the release on Tuesday of data that showed British employers hired more people in October after the government's job-protecting furlough scheme ended.
Traders will be parsing consumer price data later Wednesday for further support for Bank of England tightening.
Sterling was little changed at $1.34335 after rising as high as $1.3472 overnight.
It strengthened slightly to 0.8429 per euro, edging back toward its strongest level this month at 0.84265, reached on Tuesday.
The Aussie sank 0.24% to $0.7287 after wage growth data came in as economists expected on Wednesday, doing nothing to sway a dovish Reserve Bank of Australia.
On Tuesday, RBA governor Philip Lowe again pushed back against market pricing for a rate hike next year, saying recent data and forecasts did not warrant such a move.
In cryptocurrencies, bitcoin traded just north of $60,000, after dipping below that level on Tuesday for the first time this month. It reached a record $69,000 on Wednesday of last week.
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