The dollar pumped higher late Thursday ahead of weekend meetings of finance officials and central bank policymakers from the Group of 20 major economies.
Investors are watching the meetings in South Korea to see how officials address international currency tensions. Several countries, such as Brazil, Japan and Thailand, have recently tried to slow the rise in their currencies against the dollar, and critics say China is keeping the yuan too low. There are fears that a possible "currency war," when countries devalue their currencies to gain a trade advantage over competitors, could lead to trade barriers and hamper the global economic recovery.
Expected moves by the Federal Reserve have driven the dollar lower against currencies of developing countries, as well as the euro and yen. Against six major currencies, the dollar has dropped 6.6 percent since late August, when Federal Reserve Chairman Ben Bernanke hinted that the central bank would offer more relief.
Investors expect the Fed to begin buying bonds in November, driving down interest rates to support the economy but weighing on the dollar's value. Treasury Secretary Timothy Geithner has said that the U.S. still supports a strong dollar, however.
In late trading in New York, the euro fell to $1.3933 from $1.3961 late Wednesday. The dollar gained to 81.27 Japanese yen from 81.15 yen after sinking to its latest 15-year low of 80.85 yen Wednesday.
In Asian trading overnight, the dollar had popped against the euro and yen because of comments by Treasury Secretary Timothy Geithner in The Wall Street Journal saying that the "major currencies...are roughly in alignment now," and that the U.S. is not trying to weaken the dollar.
That suggested to some investors that he thought the dollar's recent steep drop against the yen and euro should end, said Brown Brothers Harriman analysts in a research note. The dollar gave back its gains in European trading, but reversed course again in New York to end higher.
"Geithner and the Treasury make dollar policy, but when the Fed is printing money that sort of trumps all else," said David Gilmore of Foreign Exchange Analytics in Essex, Conn. Still, the dollar's steep decline may mean it has bottomed out ahead of Fed policymakers' Nov. 2-3 meeting, he said.
The British pound dropped to $1.5713 from $1.5855, while the dollar rose to 1.0271 Canadian dollars from 1.0226 Canadian dollars and gained to 0.9665 Swiss francs from 0.9631 Swiss francs.