The euro retreated around half a percent on Monday from close to 2014 highs against the dollar after the European Central Bank's strongest signal yet that it will act to head off further gains.
Six years of debt and banking crisis have laid bare how countries like Greece, Spain and Portugal suffer from a currency that will not easily fall thanks to the capital rolling into Germany, the Netherlands and other stronger economies.
Yet, aside from regular broadsides from France, ECB policymakers have not focused much attention on the currency's level. With prices falling in many of the bloc's southern states, that seems to be changing.
ECB President Mario Draghi said in Washington on Saturday that "a further strengthening of the exchange rate would require further stimulus". Bank of France chief Christian Noyer hammered home the message on Monday saying: ``The stronger the euro is, the more accommodative policy is needed.''
Investors read that as a strong hint that outright money-printing could follow soon and the euro weakened against the dollar, and sterling in response. The greenback was also boosted by data showing U.S. retail sales surged in March, ahead of expectations.
Yet, even with increased tensions in Ukraine in the mix, it remained within a cent of 2014 highs above $1.39.
The euro traded around $1.38. It was at 140.66 yen and near one-month lows around 1.21 Swiss francs.
While participants say the market is convinced some form of further stimulus from the ECB that adds to the number of euros in circulation is inevitable, other factors like demand for peripheral euro zone debt underpin the single currency.
The dollar inched up to 101.73 .
Market players said the dollar saw some reprieve from reports that Prime Minister Shinzo Abe would meet Bank of Japan Governor Haruhiko Kuroda during the month. This helped stoke expectations for further monetary easing by the central bank. Escalating tensions in Ukraine and jitters around the sell-off in technology stocks supported the yen as a traditional safe haven.