LONDON (MarketWatch) -- The dollar was mixed against major counterparts Thursday, but sentiment remained fragile in the wake of the greenback's pounding by the euro and other currencies after the Federal Reserve announced historic efforts this week to revive the U.S. economy.
The dollar index which measures the U.S. unit against a trade-weighted basket of six major currencies, traded at 78.261, down slightly from 78.584 in North American trading late Wednesday.
"Markets have entered a new era," said strategists at KBC Bank in Brussels. "The biggest economy in the world, which holds the reserve currency, has now the lowest official interest rate and the yield of its long-term bonds is nose-diving, too." The dollar rebounded versus Japan's currency to 88.38 yen. The dollar fell to a 13-year low around 87.11 yen Wednesday.
The euro continued its upward march, jumping to $1.4628, its highest level since September, after trading at $1.4404 late Wednesday. The single currency was trading below $1.400 before the Fed's announcement Tuesday.
In recent days, the euro has plowed through a number of key resistance levels at $1.3750, $1.42 and $1.46, analysts said.
The British pound retreated to $1.5434 from above $1.55 late Wednesday.
The U.S. central bank slashed its target rate for overnight loans between banks to between zero and 0.25% and said it would buy more debt and mortgage-backed securities.
Meanwhile, President-elect Barack Obama has signaled that he will pursue a major stimulus package when he takes office next month.
That's raised concerns about efforts to fund a rising deficit, at least in the near term, said Kenneth Broux, an economist at Lloyds TSB.
"When you are in an environment where you need to attract $2 billion every day, you need to be worried about the future of the currency," he said.
The euro, meanwhile, appears to be benefiting from a "quasi-safe-haven" status given the relatively stronger fiscal positions of Germany and France, Broux said, but cautioned that recent currency moves have likely been exaggerated by thin holiday conditions.
While the euro enjoys significant momentum, it could face a reversal if the European Central Bank cuts rates aggressively next month, Broux said.
The euro was unfazed Thursday by a drop in the closely-watched Ifo German business confidence index to a record low. See full story.
The decade-old single currency continued its surge against the beleaguered British pound, surging to still another all-time high above 95 pence.
