The dollar slid to near a record low versus the euro Tuesday, as traders bet a slowing U.S. economy will prompt a Federal Reserve rate cut next week, while the European Central Bank holds steady for some time.
ECB President Jean-Claude Trichet boosted the euro by saying said credit losses in the region were not significant enough to materially impact the soundness of financial institutions. He also indicated monetary policy was not restricting growth.
The dollar has been falling recently as investors anticipate a Fed rate cut, which undermines the yield advantage of U.S. assets. Fed Chairman Ben Bernanke's speech in Berlin focused on global imbalances and did not change interest rate expectations.
"[Jean-Claude] Trichet's comments were somewhat more supportive to the euro than [Ben] Bernanke's were of the dollar," said Nick Bennenbroek, head of currency strategy at Wells Fargo Bank in New York. "Bottom line is that the main themes, of rate differentials and unwinding of carry trades, still remain in the forex market."
Traders have been selling the dollar aggressively since Friday's surprisingly weak U.S. jobs report.
Against the dollar, the euro rose as high as $1.3849 according to electronic platform EBS, nearing July's all-time highs above $1.3850. It was last up 0.3 percent to $1.3842.
Against the yen, the greenback rose 0.4 percent, at 114.06 yen as U.S. stocks advanced.
Against the Japanese currency, the euro was up 0.6 percent at 157.84 yen.
Investors expect the Fed will cut its benchmark 5.25 percent rate by at least 25 basis points at next Tuesday's meeting.
"The proximity of the euro's all-time high is becoming an irresistible target for currency traders, and I expect it to see that level broken pretty soon," said Bennenbroek.
Steadying equity markets halted safe-haven and repatriation flows, which had given some support to dollar against the low-yielding Japanese yen.