The dollar and the yen rose on Thursday as equity and commodity markets fell, encouraging investors to pare back exposure to risk and buy back the two low-yielders against perceived riskier currencies.
The higher yielding Australian and New Zealand dollars fell sharply as traders took profit from riskier carry trades, with the kiwi dollar losing 2 percent against the yen.
European equities .FTEU3 were down 0.2 percent, while oil CLc1 and gold XAU= prices fell, weighing on sentiment. Analysts said some investors were already taking risk off the table heading into the year end.
Falling equities and risk aversion have been supporting the dollar and the yen, while the higher-yielders have been pulling back, said Niels Christensen, currency strategist at Nordea in Copenhagen.
The focus is very much on risk sentiment because we don't have any major events on the agenda, plus the market is a little more sensitive going into the year-end, with people wanting to protect their positions, he said.
At 0917 GMT, the dollar index .DXY, a measure of its performance against a basket of six currencies, was up 0.4 percent to 75.476, taking it further above a 15-month low of 74.679 hit on Tuesday.
The euro fell 0.7 percent against the dollar to $1.4865 EUR= and by 1 percent versus the yen EURJPY=R to 132.37 yen, approaching key technical support at the 200-day moving average around 132.0 yen.
The euro climbed more than half a percent against the dollar on Wednesday but struggled on Thursday to break back above $1.5000 and forge new highs for the year above $1.5064.
The Australian dollar fell 1 percent AUD=D4 to $0.9186, with the currency remaining under pressure after expectations for a December rate hike recently cooled.
The New Zealand dollar was the most underperforming currency, losing 2.0 percent versus its U.S. counterpart to $0.7328 NZD=D4 and 2 percent NZDJPY=R to 65.27 yen.
Analysts said comments from the main opposition party leader in New Zealand that it would seek to change a policy that sets the central bank's main role as controlling inflation through interest rate moves added to the kiwi's fall.
The world markets have become quite long in kiwi dollar as they have in Aussie. When you have a little scare, it flushes a lot of long positions out, said Imre Speizer, strategist at Westpac in Tokyo.
Markets were also watching steps to tighten controls on capital in emerging markets such as Brazil and South Korea, although South Korea said its new measures were aimed at boosting the soundness of banks' assets and not at FX volatility.
Elsewhere, the dollar fell 0.4 percent against the yen JPY= to 89.00 yen.
It remains firmly in a downtrend against the Japanese currency stemming back to April this year, and dealers do not rule out a test of its October low of 88.01.
The market will watch U.S. jobless benefit claims for the week ended Nov. 14, due at 1330 GMT, to see if the labour market is stabilising. Economists in a Reuters survey forecast 505,000 new filings compared with 502,000 the week before.
St. Louis Federal Reserve Bank President James Bullard said on Wednesday the Fed may start tightening financial conditions by selling assets it has accumulated rather than raising interest rates.