NEW YORK—The dollar was higher against its rivals early Thursday as revived concerns over the euro zone's credit problems and worries that China may tighten monetary policy fueled demand for the greenback.
The rally in the U.S. currency began overnight when China reported its gross domestic product had expanded at a faster pace in the fourth quarter of 2009, while inflation also quickened at a faster clip. That pushed the dollar index, which tracks the greenback against a basket of six currencies, to its highest level since September 2009.
The euro was under renewed pressure, dipping to $1.4029, its lowest level since July 30, after a slew of negative news out of Europe.
A spokeswoman for the European Commission denied any plans for financial support to Greece was in the works, while the International Monetary Fund warned Portugal of its rising budget deficit. In addition, data for manufacturing and services in the euro zone disappointed investors.
"The euro continued to be the market's whipping boy," said Michael Hewson, a currency analyst at CMC Markets in London.
Early Thursday in New York, the euro was at $1.4092 from $1.4104 late Wednesday. The dollar was at 91.70 yen from 91.23 yen, while the euro was at 129.22 yen from 128.67 yen. The U.K. pound was at $1.6183 from $1.6286. The dollar was at 1.0441 Swiss francs from 1.0441 francs.
The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 78.563 from 78.369. It earlier hit 78.814, its highest level since Sept. 2.
The currency markets were hit during Asian trading after China reported that its GDP grew 10.7% in the fourth quarter of last year, up from 9.1% in the third quarter. Beijing also disclosed that inflation had risen as far as 1.9%, instead of increasing to only 1.7% as expected.
The Chinese data signals that "tighter policy is just around the corner as Beijing seeks to prevent the economy from overheating," RBC Capital strategists wrote in a note to clients.
In the euro zone, the latest PMI surveys were disappointing, with the composite PMI—covering both manufacturing and services—coming in at 53.6 this month, down from 54.2 last month and lower than the 53.7 that had been forecast.
"Negative euro sentiment is intensifying," strategists at ING Financial Markets wrote in a note to clients.
