The dollar jumped to a new two-decade high on Wednesday, as comments from Russia's President Vladimir Putin rattled markets ahead of another likely aggressive rate hike from the U.S. Federal Reserve.
Putin ordered Russia's first mobilisation since World War Two, warning the West that if it continued what he called its "nuclear blackmail" that Moscow would respond with the might of all its vast arsenal.
The news propelled the dollar index, which measures the greenback's value against other major currencies, more than 0.5% higher to 110.87 - its highest level since 2002.
European currencies bore the brunt of selling in foreign exchange markets as Putin's comments exacerbated concern about the economic outlook for a region already hit hard by Russia's squeeze on gas supplies to Europe.
The euro was fell to a two-week low of $0.9885 , within sight of two-decade lows hit earlier this month. It was last down 0.6% at $0.9912.
Sterling, which was down 0.4%, fell to a fresh 37-year low of $1.1304 even before Putin started speaking.
"The Russia headlines are stealing the thunder from the Fed at least for now," said Societe Generale currency strategist Kenneth Broux.
"A concern about an escalation in the conflict is hurting European currencies. And if the Fed is also hawkish tonight then you could see the losses snowball."
Later on Wednesday, the Federal Reserve is expected to lift interest rates by three-quarters of a percentage point for a third straight time and signal how much further and how fast borrowing costs may need to rise to tame a potentially corrosive outbreak of inflation.
