The dollar slipped Wednesday after Federal Reserve Chairman Ben Bernanke said housing sector woes would likely get worse, touching the nerves of dealers still reeling from the subprime crisis.
The euro inched up against the dollar after Bernanke's comments, from $1.3780 where it was shortly prior to the comments and a touch higher on the day. It hit an all-time high overnight above $1.3830.
The dollar slipped to against the yen.
"These words are clearly dollar bearish," said Kathy Lien, chief strategist with Forex Capital Markets in New York of Bernanke's prepared comments.
"The Fed is not ready to lower rates, but the fact that Bernanke notched down his hawkish tone is a clear indication that even Fed officials are becoming worried," she said.
The Federal Reserve also has slashed its forecasts for U.S. economic growth this year and in 2008.