The euro retreated sharply from a record high near $1.60 versus the dollar this afternoon, with profit-taking sped up by comments from Eurogroup Chairman Jean Claude-Juncker speaking out against the single currency's rise.
Mr Juncker said markets did not correctly understand the Group of Seven industrialised nations' message on forex, repeating that the G7 stressed it did not like excessive volatility as that was bad for global growth.
He also said he did not consider the euro's rise against the dollar to be desirable. The banking results provided some relief to some investors worrying about the impact of the global credit crunch on corporate profitability.
The euro had broken up to $1.5983, a record high according to Reuters data, before profit-taking kicked in.
The Juncker comments caused it to slide sharply, leaving it down 0.5 per cent at $1.5870.
But with the European Central Bank set on combating inflation and the US Federal Reserve seen cutting interest rates further to limit damage from the ongoing credit market crisis, analysts said the euro's broad uptrend remained intact.
ECB Governing Council member Axel Weber demonstrated his hawkish credentials in the wake of Wednesday's record high inflation data for March, saying that the central bank has to fight the risk of broad-based second round effects proactively and
decisively.
The crisis in credit markets was reflected in a sharp widening of the spread on two-year US interest rate swaps to their widest level in about five weeks.
The interbank cost of borrowing three-month dollars rose its largest amount since August 2007 - when the global crisis in credit markets started.
Broad dollar sentiment was undermined on Wednesday after data showing US housing starts dropped by 11.9 per cent last month and that March consumer prices rose a less-than-expected 0.3 per cent.