The euro was weaker against most major counterparts Thursday, after the European Central Bank cut its benchmark interest rate to 2%, and signaled more could come.
The move was expected, although some observers had suggested the European Central Bank could take a more cautious approach. See full story.
Speaking after the decision, ECB president Jean-Claude Trichet said that level did not necessarily constitute a floor for interest rates.
"Trichet's press conference suggests a return to incrementalism, rather than the end of the easing campaign, which could extend until rates reach 1.00%," said Ashraf Laidi, chief market strategist at CMC Markets.
The euro fetched 117.20 yen, down 0.2%, and it fell 0.6% against the pound. The UK unit last fetched 0.5%.
Against the dollar, the euro also weakened further, even after the latest round of U.S. economic data, including a jump in weekly jobless claims.
The Labor Department said initial claims for unemployment benefits rose54,000 to 524,000 in the week ended Jan. 10. Separate reports showed producer priced fell less than predicted last month and manufacturing in the New York area this month was not as weak as in December.
The dollar index , which measures the U.S. currency against a basket of six major counterparts, stood at 84.841, up from 84.313 in late North American trading Wednesday.
The U.S. currency has found consistent support in recent days, amid a return to risk-aversion in global markets.
The dollar's buoyancy has come amid a string of weak economic data, rating downgrades and poor earnings reports around the globe, noted strategists at Societe Generale.
"Importantly, the euro is being bypassed as a store of safe-haven flows thanks to the ECB decision risks, dire recent economic data and the recent blizzard of rating downgrade risks of euro-area sovereigns," they wrote clients.
Standard & Poor's cut Greece's credit rating on Wednesday, and the agency has placed ratings for Spain, Portugal and Ireland under review with the potential for downgrades. See full story.
Against this backdrop, Societe Generale reiterated expectations for the single currency to retreat back to a range of $1.20 to $1.25 this month.
