The dollar gained ground on Thursday, rising to the highest since July against the euro, as investors signaled approval of the Federal Reserve's more upbeat outlook for the U.S. economy
Analysts also noted more reports about credit-rating companies' concerns about Portugal's budget and continued risks surrounding Greece, which weighed on the euro.
The euro fell to $1.3965 from $1.4022 in late North American trading Wednesday. In Asian trading, it fell to six-month low of $1.3927.
The dollar index (DXY 78.91, +0.24, +0.30%) , which tracks the U.S. currency against a trade-weighted basket of six major rivals, rose to 78.909 vs. 78.750 late Wednesday.
Against its Japanese counterpart, the dollar pared gains to trade at 90.11 yen, up from 89.99 yen late Wednesday. The yen is also a favored currency when investors seek to minimize risk.
"Anticipation is building for the Fed to hike rates," said Greg Salvaggio, vice president for capital markets at Tempus Consulting Inc. "Growth in the eurozone is starting to lag. We're seeing a real possibility of sovereign default. If Greece goes, does that mean Spain and Portugal are next?"
In earlier trading, analysts also pointed to covering of short positions after President Barack Obama's first State of the Union speech, where he called for more job creation. See full story on Obama State of the Union speech.
"The EUR/USD dropped below the psychologically key 1.4000 figure in early Asian trade today, hitting its lowest point in more than six months as it tripped stops," said Boris Schlossberg, director of currency research at GFT. Stops are orders placed to help traders avoid losses in case of a large currency move.
The dollar briefly extended gains after the U.S. Labor Department reported that the number of initial claims in the latest week fell 8,000 to 470,000. The consensus forecast of Wall Street economists was for claims to drop below 450,000. Analysts noted seasonal factors may still b distorting the data.
A separate government report showed that orders for durable goods, excluding volatile transportation orders, rose smartly last month.
On Wednesday, the dollar's gains accelerated against major currencies after the Federal Reserve kept interest rates near zero, as expected, but issued a more upbeat assessment of the U.S. economy.