The dollar gyrated Thursday on President Donald Trump's comments favoring a strong US currency, while European and Asian equity bourses retreated as their currencies gained ground.
One day after US Treasury Secretary Steven Mnuchin seemed to embrace a cheap US currency, Trump told CNBC Mnuchin's remarks had been taken out of context, and restated the traditional US policy.
"Ultimately, I want to see a strong dollar," Trump said, sparking a rally for the US currency, which had hit a three-year low against the euro earlier in the day.
A 2200 GMT, the euro was at $1.2393, down a hair from a day earlier and well below its session peak of $1.254.
Mnuchin on Thursday tried to clarify his comments, but European Central Bank chief Mario Draghi rebuked the choice of language, and said volatility in the currency markets "represents a source of uncertainty."
Without naming Mnuchin, Draghi indicated the wording ran counter to the commitment reflected in the International Monetary Fund statement from October, to "refrain from competitive devaluations, and... not target our exchange rates for competitive purposes."
Trump's remarks were not reported until late afternoon US time, after stock markets in Europe and Asia had already closed.
Amid the uproar on foreign exchange markets, the rising euro had pushed the main blue-chip indices into the red, despite positive data out of the region's economic powerhouse, Germany.
London's FTSE closed 0.4 percent lower, Frankfurt's DAX fell 0.9 percent and the CAC 40 in Paris shed 0.3 percent.
The pattern was similar in Tokyo, where the Nikkei slid 1.1 percent against a spiking yen.
Masayuki Kubota, chief strategist at Rakuten Securities, said in a commentary that exchange rates have been affected frequently by political factors including Trump's comments.
And "if US President Trump makes comments criticizing a cheaper yen, the yen's depreciation may halt," Kubota said.
- Wall Street records -
Meanwhile, in the US, the Dow and S&P 500 pushed to records, while the Nasdaq retreated as market insiders debated whether the rally is losing steam.
Generally positive outlooks from companies have extended the Wall Street rally begun in the wake the US tax cuts passed in December, enabling more records as earnings season has accelerated. But some question whether the market can go much higher.
"New highs are always welcome, but there is a growing chorus among strategists and technicians stating that the stock market might be getting a little bit ahead of itself," said Gorilla Trades market strategist Ken Berman.
Still, some analysts see more running room for stocks given that investors have for more than a year reliably stepped in to buy at each pullback.
- Key figures around 2200 GMT -
Euro/dollar: DOWN at $1.2393 from $1.2407
Pound/dollar: DOWN at $1.4143 from $1.4236
Dollar/yen: DOWN at 109.43 yen from 109.24 yen
New York - DOW: UP 0.5 percent at 26,392.79 (close)
New York - S&P 500: UP 0.1 percent at 2,839.25 (close)
New York - Nasdaq: DOWN 0.1 percent at 7,411.16 (close)
London - FTSE 100: DOWN 0.4 percent at 7,615.84 (close)
Frankfurt - DAX 30: DOWN 0.9 percent at 13,298.36 (close)
Paris - CAC 40: DOWN 0.3 percent at 5,481.21 (close)
EURO STOXX 50: DOWN 0.6 percent at 3,630.15
Tokyo - Nikkei 225: DOWN 1.1 percent at 23,669.49 (close)
Hong Kong - Hang Seng: DOWN 0.9 percent at 32,654.45 (close)
Shanghai - Composite: DOWN 0.3 percent at 3,548.31 (close)
Oil - Brent North Sea: DOWN 11 cents at $70.42 per barrel
Oil - West Texas Intermediate: DOWN 10 cents at $65.31 per barrel