The U.S. Federal Reserve, meanwhile, is expected to cut rates by 25 basis points to 2 percent in an attempt to ease problems in a slowing U.S. economy.
"The main driver is the euro zone inflation data that continues to reinforce the hawkish stance of the ECB, and that's in stark contrast to the Federal Reserve which we expect to continue easing monetary policy," said Lee Hardman, currency economist at BTM UFJ.
The euro had reached $1.5967 according to Reuters data, up 1 percent on day and the highest level since its launch in 1999.
The single European currency is now nearly 90 percent higher than its trough in October 2000.
The euro also reached an all-time high versus the pound at 80.76 pence.
The dollar fell versus the yen.
It continued to suffer from jitters about the health of the financial sector with a Wall Street Journal report that Merrill Lynch would announce fresh asset writedowns of $6-$8 billion when it reports quarterly earnings on Thursday.
"Some people think the worst of the banking problems is behind us, but poor earnings and more writedowns could have a hand in setting the market's direction," said Steve Barrow, chief currency strategist at Bear Stearns.
Results in Focus
JPMorgan Chase will announce their first-quarter earnings later on Wednesday, in addition to big-name corporations like Coca-Cola and eBay .
The U.S. currency reversed gains made against the euro after data on Tuesday showed that U.S. producer prices climbed faster than expected in March, while a gauge of New York manufacturing activity rose in April.
European Central Bank officials have maintained a tough stance on inflation, suggesting it is unlikely to cut interest rates from the current 4 percent any time soon.
Later on Wednesday, investor attention will turn to the U.S. consumer price index for March as well as data on housing starts and industrial output.
U.S. interest rate futures show investors see a roughly 80 percent chance of the Fed lowering rates by 25 basis points at its April 29-30 policy meeting, and a 20 percent chance of a 50 basis point cut.