The Dollar resumed its slide and fell to record lows against the Euro on Wednesday amid growing pessimism over the US economy. Demand for the currency fell further after data showed the country's service sector contracted for a second straight month in February. Also on Wednesday, US Treasury Secretary Henry Paulson told policy-makers that while the economy would likely continue to grow, risks were to the downside, adding to mounting fears of an economic recession.
EurUsd jumped to a historic peak of 1.5302 yesterday. It was last trading at 1.5278, up 0.47%. UsdJpy climbed yesterday to session peaks of 104.18 as US stocks rebounded from Tuesday's losses. It was last trading up 0.51% at 103.93.
News that the US services sector contracted at a slower pace in February boosted investors' appetite for risky assets such as stocks and high-yielding currencies at the expense of the low-yielding Japanese yen and Swiss currency. The Institute for Supply Management said its non-manufacturing index climbed to 49.3 in February, beating market expectations for a reading of 47 and above January's print of 44.6. A reading below 50 means a contraction.
Investors showed little restraint against driving the Dollar too low against the euro before today Bank of England and European Central Bank policy meetings. Analysts expect the ECB to maintain its hawkish inflation rhetoric despite complaints this week by euro-zone finance minister that the Euro is overvalued against some currencies.
Elsewhere, the New Zealand dollar erased losses against the dollar after the country's central bank flagged inflation pressures from food, oil and wages. The Reserve Bank of New Zealand left its benchmark lending rate unchanged at 8.25% as expected. NzdUsd last traded up 0.43% at 0.8030 from 0.7924 low before the rate decision.