The Dollar rose across the board on Thursday after US government data showed resilience in the labor market, while a key measure of business sentiment in Germany plunged undermining the Euro. The Euro's fall followed an early week rally to a record 1.6019 on Tuesday, the highest level since the Euro’s inception in 1999, as investors bet the ECB would raise interest rates to restrain inflation. But ECB policy-makers' comments on excess volatility in Euro trading combined with weak economic growth data this week, triggered a Sell Off in the currency, analysts said.

In Germany, yesterday reading on business sentiment showed the biggest monthly fall since September 2001. The headline Ifo index fell to a much lower-than-expected 102.4 in April, its lowest since January 2006. The Ifo, coupled with a slump in the euro zone manufacturing PMI to levels nearly implying an economic-contraction on Wednesday, suggested that the euro zone may not be immune to a US economic slowdown.

EurUsd was down 1.3% at 1.5676, more than 3 cents below Tuesday's record high and its lowest in at least two weeks. EurJpy was also down 0.46% at 163.58, while UsdJpy was up 0.85% at 104.36. UsdChf rose 1.96% to 1.0356.

ECB President Jean-Claude Trichet said on Thursday that there is concern about the impact of currency fluctuations on financial stability. If anyone was (betting) on a rate hike sometime this year from the ECB, the Ifo would have certainly reduced the chances, said Analyst.

The Dollar's gains come as investors look closely at whether the Federal Reserve might be ready to pause in its aggressive run of interest rate cuts after an expected 25bp cut in the fed funds rate next week to 2%. The U.S. central bank has cut 300bp from its benchmark fed funds rate since last September in an effort to stave off recession. A report on weak new US home sales in March failed to provide lasting clues on the outlook for interest rates.