The dollar climbed sharply against the euro on Thursday ahead of the long Easter holiday weekend, as oil, gold and other commodities tumbled in fading speculative fever.
Against the Japanese currency, the dollar rose to 99.37 yen from 99.01 on Wednesday.
Japan's financial markets were closed on Thursday and will reopen Friday. The US markets will be closed Friday and reopen Monday.
The dollar's recovery followed low points earlier in the week amid credit crunch jitters and market turmoil. On Monday, the euro surged to a record peak of 1.5905 dollars while the dollar fell to a 12-year low of 95.75 yen.
Since then, the dollar picked up after the US Federal Reserve on Tuesday slashed its benchmark federal funds rate by three-quarters of a point to 2.25 percent in a bid to ease a growing credit crisis that is threatening to freeze up financial markets.
A sustained dollar rebound, however, appeared unlikely because of continued worries about the fallout from the US housing market meltdown, despite the Fed rate cut.
"We would not get too bearish on the euro just yet," said Roger Bootle, managing director at Capital Economics.
"Indeed our expectation that US interest rates will drop to just one percent by mid-year could push it up further over the coming months," he added.
Boris Schlossberg, at Forex Capital Markets, said the unwind of the euro's recent rally to 1.5900 dollars initially had been trigged by a sharp decline in the price if gold during the Asia session.
The selling pressure continued through the London open as both long-term players and short-term speculators all dumped their long euro positions, he said.
"One possible reason for euro's sudden weakness is the growing body of evidence that EZ (eurozone) economy is beginning to slow down," Schlossberg said.
"Yesterday's worst trade deficit in a decade and today's lower than expected PMI services readings suggest that the high exchange rate and the collapse of demand in US are finally starting to impact EZ businesses."
A survey showed on Thursday that eurozone activity slowed in both the manufacturing and services sectors.
The 15-nation eurozone's purchasing managers' index (PMI), compiled by NTC Research, slid to 51.9 points in March, compared to 52.8 points in February, according to a first estimate.
"The further fall in the eurozone composite PMI in March supports other evidence that the (eurozone) economy slowed further in first quarter," said Capital Economics analyst Ben May.
The Fed's actions earlier this week led to a cascade effect of buying US dollars and selling commodities like oil and gold, said Andrew Busch of BMO Capital Markets.
"If you sold US dollars and bought commodities in the hopes of avoiding the credit nuke shock wave, guess again," he said. "These moves are brutal and acerbic in nature as the markets spasm from de-leveraging."
In late New York trade, the dollar stood at 1.0081 Swiss francs, up from 0.9986 late Wednesday.
The pound was at 1.9866 dollars, up from 1.9849.