The dollar rose for a third straight day against the euro and the yen Wednesday as investors continued to focus on the prospect of sustained rises in U.S. interest rates.
Comments from a Federal Reserve policy maker and a report on personal consumption spending reinforced expectations of higher rates.
Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, said in a speech Wednesday that the central bank must "respond vigorously" to signs of inflation.
Lacker will be a voting member of the Fed's policy-setting committee next year.
Nobuaki Tani, a senior currency dealer in Tokyo at Resona Bank, said before the speech that "investors are fixated by Lacker, especially after a series of strong economic data."
He added, "Expectations for U.S. rates will continue to boost the dollar."
The Fed has raised rates 13 times since June 2004.
Earlier, the personal consumption expenditures index excluding food and energy, a measure of inflation used by the Fed in its forecasts, was revised higher, to 1.4 percent from the previously reported 1.2 percent in the third quarter, the Commerce Department said.
The same report showed the economy grew 4.1 percent in the three-month period, lower than the 4.3 percent rate reported last month.
The report reinforced speculation that the Federal Reserve would raise interest rates at least two more times. Higher U.S. rates should enhance the yield advantage that has pushed the dollar up about 14 percent against the euro and the yen this year.
"It was slightly dollar-positive," said David Mozina, a currency strategist at Lehman Brothers. "The price component, it's still bubbling. That is of concern to the Fed."
In 4 p.m. trading, the euro eased to $1.1837 from $1.1863 late Tuesday. The dollar rose to ¥117.315 from ¥117.145, and the dollar firmed to 1.3133 Swiss francs from 1.3088 francs. The pound fell to $1.7434 from $1.7531.
The euro failed to sustain the gains it had made in European trading after Reuters quoted unidentified sources at the European Central Bank as saying the central bank would lift interest rates again in March.
"We're going to have to get more solid indications that the ECB are preparing to raise rates again soon before people start buying the euro aggressively," said Paul Robson, a currency strategist at Royal Bank of Scotland.
Interest rate futures contracts suggest investors have increased their bets that the central bank will raise borrowing costs further next year.
The yield on the three-month Euribor contract due in September reached 3.025 percent, the highest since March. The ECB raised its benchmark for the first time in five years on Dec. 1, to 2.25 percent.
Otmar Issing, the ECB chief economist, is among policy makers who have warned that the increase may not be the last should inflation pose a threat. Inflation in the euro region has exceeded the bank's 2 percent target every month since May.
