The dollar was on track for a fourth straight week of gains against major rival currencies on Friday, as traders wager on interest rates rising faster in the United States amid surging inflation around the world.
The euro has been one of the biggest losers versus the greenback, set to fall around 1% this week, as European Central Bank President Christine Lagarde has pushed back against expectations of policy tightening in the eurozone.
Lagarde doubled down on her position on Friday, saying the ECB should not tighten policy as it could choke off recovery. The euro was last down 0.5% on the day at $1.13195.
The overall dollar index, which tracks the dollar against a basket of six major currencies, is on course for around a 0.9% weekly gain.
The dollar was up 0.4% on the day at 95.899, close to the 16-month high of 96.266 hit on Wednesday.
Expectations are growing that the dollar can strengthen further into next year.
"We think a combination of Fed tapering and slowing global growth should favour the U.S. dollar in 2022," analysts at UBS said in an outlook report.
This week, U.S. retail sales beat expectations after last week's inflation surprise. In Europe, meanwhile, governments are battling a surge in COVID-19 cases and economic data has been mixed.
"Previous post-GFC occasions when the euro traded below $1.10 were accompanied by a big euro short position," said Societe Generale strategist Kit Juckes.
"If the question is 'will the market now get very short euros' then I think the answer is that it will unless data improve dramatically."
The Japanese yen weakened slightly against the dollar after a fresh 55.7 trillion yen ($490 billion) stimulus package was unveiled by Japan's government. The dollar was last up 0.2% against the yen, at 114.490 yen.
Sterling shed some of its recent gains, last down 0.4% at $1.34440.
In cryptocurrencies, bitcoin is below $60,000 and set for its worst week in six months - last trading around $57,500.
($1 = 114.4500 yen)
Reporting by Iain Withers Additional reporting by Tom Westbrook in Sydney Editing by Peter Graff