Investing.com - The dollar rose against its rivals to an 18-month high Tuesday, supported by a slump in the euro as concerns over Turkey's vulnerable economy persisted despite a rebound in the lira.
The U.S. dollar index, which measures the greenback against a trade-weighted basket of six major currencies, rose by 0.342% to 96.56.
The lira rose more than 7% against the greenback, clawing back some earlier losses suffered on Friday and Monday. But analysts said Turkey was experiencing a "crisis of confidence," warning there may yet be more pain to come.
"In our experience, most confidence issues are not 'one and done'; they often need to get worse before they get better. Furthermore, a crisis of confidence is usually a very fluid and dangerous situation because investor and market sentiment can turn for the worse very quickly," Wells Fargo (NYSE:WFC) said.
Turkey's central bank on Monday said it would provide as much liquidity as necessary, cutting lira and foreign currency reserve requirements for Turkish banks.
That, however, did little stem concerns as analysts continued to questioned Turkey central bank's independence from the government: the biggest issue for most investors.
"The currency [lira] remains in free fall as long as the Turkish central bank's independence from the government is an issue," Commerzbank (DE:CBKG) analysts said.
Concerns about European banks' exposure to Turkey weighed on the euro, lifting the greenback, as the single currency shrugged off data showing faster-than-expected economic growth in the member bloc.
EUR/USD fell 0.61% o $1.1340.
Elsewhere, the dollar was also boosted by an ongoing plunge in the pound as data showed U.K. wage growth slowed amid investors fears that Britain's departure from the European Union will be fractious.
The rebound in the lira saw demand for safe-haven yen and the Swiss franc ease.
USD/JPY rose 0.34% to 111.07, while USD/CHF fell 0.03% to 0.9936.
USD/CAD fell 0.27% to C$1.3099.