The US Dollar tumbled to record lows against the Euro and the Swiss franc on Thursday after the European Central Bank downplayed prospects of an interest rate cut and did not voice concerns about the rally in the Euro. Analysts said there had been some anticipation that ECB President Jean-Claude Trichet would comment on the Euro after remarks this week by euro zone finance ministers group chairman Jean-Claude Juncker that the common currency was overvalued.
News that US home foreclosures rose to record highs in Q4 also added to bearish investor sentiment towards the Dollar, helping to push it to historic troughs versus a basket of currencies.
EurUsd jumped to 1.5396, its highest level since its launch in 1999. It was last trading at 1.5384, up 0.69%.
The ECB left its benchmark interest rate at 4% but raised inflation forecasts for this year and 2009. ECB staff also cut their prediction of GDP growth in the euro zone. With the Federal Reserve expected to cut its benchmark overnight lending rate by at least 50bp later this month as it fights to stave off an economic recession in the United States, market attention was focused on the yield play.
UsdJpy declined to a session low of 102.53 and UsdChf dropped to a record low at 1.0213.
Central banks in United Kingdom and New Zealand also left policy on hold on Thursday. GbpUsd hit the year's high 2.0140 in a relief rally as markets had priced in a small chance of a British cut from the current 5.25%. NzdUsd was supported after the Reserve Bank of New Zealand said inflationary pressures remained persistent. The benchmark rate there is 8.25%.