NEW YORK (CNNMoney.com) -- The dollar surged to a 4-month high against the euro Wednesday amid ongoing concerns about the Greek economy and speculation that Chinese monetary officials could move to tighten credit conditions.
What prices are doing: The dollar rose to its highest level against the euro since August, gaining 1.2% versus the shared currency to $1.4142. It was up 0.4% against the U.K. pound to $1.6295.
Against the Japanese yen, the dollar held steady at ¥91.18.
What's moving the market: The euro fell for a third day as traders remain worried that Greece's fiscal woes could be a harbinger of more economic pain in Europe.
Standard & Poor's, Moody's Investors Service and Fitch Ratings all downgraded their credit ratings for Greece last month.
In China, the Hang Seng stock index fell nearly 2% on rumors that regulators have told banks to cease all lending activity for the rest of the month. The talk raised concerns that China's robust economic growth could slow and hinder the global recovery.
The dollar, which is seen as a safe haven by currency traders, also benefited from mixed U.S. economic reports and downbeat corporate results.
A government report showed that new home construction fell 4% in December, while the number of building permits issued in the month jumped 10.9%.
Separately, a key measure of inflation at the wholesale level unexpectedly rose 0.2% in December, after a 1.8% rise the month before.
The greenback was also supported by worse-than-expected quarterly results from Bank of America. The nation's largest lender reported a loss of $5.2 billion in the fourth quarter, or 60 cents per share, wider than the expected loss of 52 cents per share.
What analysts are saying. "Euro's losses and the U.S. dollar's rebound continue to intensify as the risk impact from Greece's fiscal conditions was compounded by speculation of further Chinese credit restrictions," said Ashraf Laidi, chief market strategist at CMC Markets in London.
Analysts said the currency market is also responding to the outcome of Tuesday's special election for the U.S. Senate seat in Massachusetts, in which Republican Scott Brown defeated Democrat Martha Coakley.
Brown, who opposes the sweeping health care reform bill making its way through Congress, could upset the balance of power on Capitol Hill, since Democrats no longer have a filibuster-proof majority.
"The Republican win in Massachusetts is extremely dollar positive because it deals a big setback to the health care bill," Kathy Lien, director of currency research for trading firm GFT, said in a research report. "At a cost of more than $1 trillion, less government spending would help to reduce the U.S. budget deficit."
