./www.fxserver.com/ The US dollar reached its highest level in at least two months against major currencies on Friday, as markets were encouraged by the pace of the military offensive.
The dollar was already buoyed by optimism that the campaign to topple Saddam Hussein was proceeding to plan, but on Friday rumours of Saddam's death converged with the long-awaited aerial bombardment of Baghdad to create further gains.
"What has triggered this dollar and equity buying is the end of diplomatic wrangling and incessant debate. All that tension was alleviated when we went to war, but clearly has not gone away," said John McCarthy, director of foreign exchange at ING Barings, New York.
Traders sent the dollar soaring on rumours that Saddam had been killed by bombing at the start of the campaign, but McCarthy voiced skepticism.
"I'm not sure we warrant a reversal of the trend but we certainly warrant a re-examination of whether the euro belongs above $1.10."
The euro sank as low as $1.0502 against the dollar, its lowest since January 15.
The dollar bought 121.80 yen, up more than 1.2 per cent from its previous US close and its strongest since mid-December.
Against the Swiss franc, the dollar soared to more than 1.40 francs. With markets fixated on Iraq, US inflation data was largely ignored. The Consumer Price Index rose 0.6 per cent in February, 0.1 per cent more than expected.