Investing.com - The dollar climbed to fresh four-year highs against a basket of other major currencies on Wednesday, as strong U.S. new home sales data added to expectations for an early rate hike by the Federal Reserve.
Official data showed that U.S. new home sales data rose 18.0% last month to 504,000 units, beating expectations for a 4.4% gain to 430,000 units. That was the highest level since May 2008 and marked the second straight month of gains.
New home sales for July were revised to a 1.9% increase from a previously estimated 2.4% drop.
The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, advanced 0.41% to 85.16, the highest level since July 2010.
USD/JPY edged 0.08% lower to 108.80.
The yen found support earlier after Japanese Prime Minister Shinzo Abe voiced concerns over the economic impact of recent weakness in the yen.
Prime Minister Abe reportedly said that the weaker yen had both positive and negative impacts and that he wanted to carefully watch the impact of yen weakness on regional economies and on small and mid-sized companies.
The euro dropped to fresh 14-month lows against the dollar with EUR/USD last down 0.49% at 1.2782.
Earlier Wednesday, a report showed that Germany's Ifo business confidence index deteriorated for the fifth successive month in September, adding to fears over the outlook for the euro zone’s largest economy.
The Ifo economic institute's business climate index fell to 104.7 from 106.3 in August. It was the lowest level since April 2013 and much weaker than economists’ forecasts for 105.7.
Also Wednesday, European Central Bank President Mario Draghi reiterated the bank’s commitment to accommodative monetary policy and said it will use every tool at its disposal to fight deflation in the euro area.
"Monetary policy will remain accommodating for a long time and I can tell you that the Governing Council is unanimous in committing itself to using the tools at its disposal to bring inflation back to just under 2%."
Elsewhere, GBP/USD slid 0.30% to 1.6341, while USD/CHF climbed 0.53% to a new one-year peak at 0.9447.
The commodity linked Australian and New Zealand dollars remained higher. AUD/USD was up 0.33% to 0.8869 off the seven-month low of 0.8830 struck overnight. NZD/USD added 0.26% to trade at 0.8071, holding above the one year low of 0.8041 struck overnight.
Meanwhile, USD/CAD hit fresh six-month highs, edging up 0.08% to 1.1086.
Investors remained cautious after U.S. airstrikes overnight in Syria fanned concerns over geopolitical risks.