The euro hit a one-month low against the dollar and a three-week trough versus the yen this morning due to uncertainty over policy steps the European Central Bank may take.
The Australian dollar earlier climbed to its highest in more than six months against the euro but then retreated sharply after Asian shares fell, prompting investors to reduce risky bets including the Aussie, also pushing the yen broadly higher.
ECB President Jean-Claude Trichet signalled yesterday during a trip to Tokyo that the bank's next move could likely be an interest rate cut of 25 basis points.
But Mr Trichet kept mum on details of plans for unconventional policy responses that are due to be unveiled at the ECB's next policy meeting on May 7th.
Mr Trichet also dismissed any suggestion that ECB policy makers were divided over how far it should go and said he did not think zero interest rates would be appropriate for the ECB.
Market players are keen to see whether the ECB will follow the Federal Reserve, the Bank of England and the Bank of Japan in making asset purchases to contain the financial crisis.
The euro fell as low as $1.2967 on the EBS trading platform, its lowest since March 17th, before recovering to $1.3016, down 0.2 per cent on the day.
Mr Trichet said on Friday that saying the euro was weak did not reflect the current situation. The euro was trading around $1.31 at the time of his remarks. The ECB chief also said he appreciated US comments that a strong dollar was in US interests.
Reuters