The dollar came under fresh selling pressure on Thursday even after China hit back over a “fake news” report that it could slow or halt purchases of US Treasuries.

The greenback dived Wednesday against most rivals as Bloomberg News reported that Chinese authorities reviewing foreign-exchange holdings had recommended the move.

Initially fruitful, the dollar's attempts to recoup the previous day's losses fizzled out by the European mid-afternoon, with the greenback lower against the euro, the yen and sterling.

Earlier, China's State Administration of Foreign Exchange denied the Bloomberg report, saying in a statement: “We think this story could be quoting a mistaken source or it could also be a piece of fake news.” The report however briefly sparked fears on Wednesday that a huge amount of foreign demand for dollars would dry up.

“'China has reduced their purchase of US treasuries was the news which crashed the prices of the US Treasuries and pushed the dollar index lower yesterday,” noted analyst Naeem Aslam at trading firm ThinkMarkets.

“But the Chinese officials clearly labelled this as fake news and assured markets that China is only diversifying its options.”

China has long invested heavily in US bonds as a way of controlling the value of its own yuan currency and Bloomberg News estimates it currently holds around $1.2 trillion in Treasuries, double what it owned 10 years ago.

“We do know that China is the largest buyer of the US Treasuries, and if there is any reduction in the Chinese appetite for the US Treasuries, it would have serious consequences for the global markets,” cautioned Aslam.

Elsewhere on Thursday, London briefly touched another record high despite retail gloom as mining and utilities stocks rose.

The retail sector was hit by underwhelming Christmas trading updates from supermarket giant Tesco and clothing-to-food chain Marks & Spencer.

“Retail stocks in the UK have been smashed,” noted Manulife Asset Management equities analyst Will Hamlyn.

“They are so out of favour at the moment partly due to Brexit, partly due to the weak Christmas season (and) partly due to expected share losses to online” competition.

Eurozone stock markets, having opened steady, slipped as the session wore on.

Shares in AirFrance slumped 2.9 per cent after Italian media reports it would ally with low-cost easyJet to take over Alitalia.

Shares in the British low-cost carrier meanwile jumped 3.9pc.

US stocks resumed their upward climb, with the Dow striking another record high, after a pullback in the prior session. Shares in airlines and energy companies were among the early winners.

The Dow was 0.4pc higher in late morning trading.

Oil surge

Oil prices meanwhile surged on Thursday amid falling US stockpiles, unrest in key producer Iran and hopes that Trump's tax cuts will boost demand.

European benchmark Brent hit $70 per barrel, returning to price levels unseen for three years.

“The price target was being eyed by Brent for some time, and even though the OPEC production cut extension in November formed the basis of the move higher, additional fear factors finally pushed it across the $70 line,” said market analyst David Madden at CMC Markets UK.

Elsewhere, Asian equity markets mostly fell as this year's rally gave way to profit-taking in much of the region.

However, Hong Kong extended a record winning streak to 13 days thanks to inflows of cash from mainland investors.