The dollar was set for its best week in a year on Friday, extending gains against the yuan and Mexican peso on concerns emerging markets could suffer most if President-elect Donald Trump turns his protectionist rhetoric into actions.
Traditional safe havens for investors' money, the yen and the Swiss franc, recovered some of this week's losses against the greenback, however, as markets worried about the global consequences of such a policy shift and of higher U.S. inflation.
Expectations of rising U.S. price pressures if Trump delivers on promises to boost public spending and put barriers on cheap imports have driven Treasury yields higher and boosted the dollar since his victory on Tuesday.
The gains have come almost across the board, with the exception of a recovering British pound and, in morning trade in Europe, the dollar was another 0.1 % higher against the basket of currencies that measures its broader strength.
There are doubts whether the momentum will continue into next week, and gains were focused on the two currencies that would be expected to suffer most from U.S. trade tariffs, protectionism and immigration controls.
China fixed the yuan another 0.2 % lower at 6.8120 per dollar and less-tightly controlled offshore rates reached as high as 6.85, pointing to expectations of more losses. The peso sank 3 % to a record low of 21.395 per dollar.
"Emerging markets to the sword is the chatter," said Richard Benson, co-head of portfolio investment with currency managers Millennium Global in London.
"The question is whether the bond rout that we've seen lasts next week. It is pretty hard for U.S. stocks to keep rising when emerging is getting whacked, or for the dollar to perform against the yen if risk assets come under proper pressure."
The dollar dipped 0.4 % from highs of close to 107 yen hit on Thursday. It was marginally stronger on the day at 1.0879 per euro, a third of a cent off the previous session's 3-1/2 month high.
The greenback, however, was still set to end the week with a more than 3 % rise against its Japanese peer. It has gained almost double that from lows hit on U.S. election night before it became clear Trump was heading for victory.
Analysts from Goldman Sachs, forced to trim one of the market's best-known bullish dollar calls earlier this year, said in a note overnight they expected the greenback to add to its gains.
"Many (are) asking if dollar strength in recent days can extend," they said. "We think so and see the election as something of a 'reset'."
Goldman are among those who have called for a rise to parity with the euro. The note gave no details of current forecasts.
The fast pace of the dollar's appreciation against the yen prompted a response from Japan's Finance Minister Taro Aso, usually known to make statements when the currency pair moves in the opposite direction.
"It is exceptional for the yen to move 5 yen (against the dollar) in two days," he told reporters, stressing the importance of market stability.
The New Zealand dollar remained on the back foot after the country's central bank cut interest rates on Wednesday. The kiwi slipped 0.2 % to $0.7198, poised to lose nearly 2 % this week.
The Australian dollar, sensitive to swings in risk appetite, was down 0.2 % at $0.7598 and on track for a 1 % weekly drop.