The U.S. Federal Reserve's further increase in key interest rates by 0.75 percentage points gave the dollar further impetus.
The dollar index, which tracks rates against major currencies, rose to 111.79 points on Thursday, a 20-year high.
At the beginning of 2002, the index was at more than 120 points.
This had been the most recent surge in the world's most important currency, which began in 1995 and ended in 2002.
The dollar's highest level since the collapse of the Bretton Woods system of fixed exchange rates in the 1970s was more than 165 points in the mid-1980s.
Martin Hock
Editor in Business.
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Philip Pickert
Business correspondent based in London.
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John Knight
Correspondent for politics and economy in Switzerland.
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Patrick Welter
Correspondent for business and politics in Japan based in Tokyo.
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Conversely, the euro depreciated to $0.981, its lowest level since October 2002. "What else is there to buy but the dollar right now," asked rhetorically Sally Auld, chief investor at wealth manager JB Were.
“The Fed will not stop raising interest rates in the foreseeable future.” The central bank had made this clear the previous evening.
Other stockbrokers also referred to the attractiveness of the dollar as a "safe investment haven" against the background of the looming recession in Europe, the weakening Chinese economy and the ongoing war in Ukraine.
The dollar is the only game in town, according to TD Securities.
As expected, the German stock market opened on Thursday with significant discounts.
Switzerland also increased
In Switzerland, the period of negative interest rates is coming to an end after almost eight years.
As of this Friday, the Swiss National Bank (SNB) will increase its key interest rate by 0.75 percentage points to 0.5 percent.
"In this way, we are counteracting the renewed increase in inflationary pressure and making it more difficult for goods and services to spread to goods and services that have so far been less affected by inflation," said SNB President Thomas Jordan.
"It cannot be ruled out that further interest rate hikes will be necessary to ensure price stability in the medium term," Jordan added.
Inflation in Switzerland was 3.5 percent in August.
Although that is significantly less than in the euro zone, it is still well above the target corridor of 0 to 2 percent, which means price stability for the SNB.
In June, the National Bank had already increased the key interest rate, which had been a record low of minus 0.75 percent since the beginning of 2015, by half a percentage point.
The SNB is now anticipating inflation of 3.4 percent for the fourth quarter of 2022.
One of the reasons for the comparatively low inflation is the strength of the Swiss currency.
You currently only get 0.96 francs for one euro.
The strong Swiss franc makes imports into Switzerland cheaper and thus slows down inflation.
In addition, Switzerland benefits from the fact that a large part of the electricity comes from domestic hydro and nuclear power.
The British central bank meanwhile raised the key interest rate “only” by 0.5 percentage points on Thursday.
Many on the capital market had previously expected a more aggressive interest rate hike of 0.75 points in order to combat inflation, which is currently around 10 percent.
Three of the nine members of the Bank of England's (BoE) monetary policy committee voted in favor of a major rate hike.
A majority of five members, including BoE Governor Andrew Bailey and chief economist Huw Pill, were for half a percentage point.
In the FX market, the pound barely moved after the decision.
In the weeks before, the British currency had depreciated significantly due to recession concerns.
The central bank warned that "further, powerful" rate hikes would be necessary in the coming months to bring inflation under control.
Their economists see the country in a recession as early as autumn, which will, however, be somewhat weaker than previously feared.
Prime Minister Liz Truss' new government has approved large aid packages to relieve households and businesses of high energy prices.
However, the price caps cost the state tens of billions of pounds and are bought with large deficits.
Japan intervenes
Japan intervened for the first time since 1998 against the yen's weakness in the foreign exchange market after the Bank of Japan confirmed its exceptional policy and negative interest rate policy on Thursday.
The yen depreciated further after the monetary policy decision and was temporarily traded at 145.9 yen per dollar.
In less than an hour, Japanese dollar purchases pushed the exchange rate down to as high as 140.7 yen per dollar.
Later the dollar cost around 142 yen.
The yen appreciated against the euro by almost 4 yen to around 140 yen per euro.
The yen has depreciated by around 20 percent against the dollar since the beginning of the year.
Masato Kanda, the official responsible for monetary policy at the Japanese Ministry of Finance, spoke of a decisive intervention.
The government was silent on the extent of the dollar purchases.
Market analysts suspected that the Bank of Japan had intervened in the market alone and without the support of other major central banks.
After the interest rate hike by the Swiss National Bank, the Bank of Japan is the only central bank in the world that is still sticking to short-term negative interest rates at minus 0.1 percent and is not ruling out further easing.
Central bank governor Haruhiko Kuroda confirmed to journalists that the central bank is not thinking of raising interest rates in the foreseeable future.
"I can assure you that there will be no monetary tightening at this time," Kuroda said.
The inflation rate in Japan has recently reached around 3 percent.