The euro fell to a three-month low against the dollar after a top European Central Bank official detailed the bank's commitment to low interest rates.
In an interview with Reuters, ECB executive board member Jörg Asmussen said the central bank may keep interest rates low beyond 12 months, expanding upon remarks by ECB President Mario Draghi last week. Mr. Asmussen also said the central bank wouldn't rule out another round of cheap loans, which were used two years ago to pump capital into struggling euro-zone banks.
The euro fell swiftly on Tuesday after Mr. Asmussen's comments, as he signaled the ECB would continue to hold down interest rates, which reduces the appeal of holding euro-denominated assets. Last week, Mr. Draghi pledged that interest rates in the euro zone would remain at low levels for an "extended period of time," an unprecedented move for a central bank that has previously shunned offering guidance.
"The Asmussen comments have aided the decline of the euro," said Brian Daingerfield, currency strategist at RBS Securities in Stamford, Conn. "It appears that Asmussen is trying to make sure markets keep new ECB easing on the table."
The euro dropped as low as $1.2776, its weakest level against the dollar since April 4. Analysts predict the common currency is poised to fall below $1.2740, which would be a 2013 low for the commony currency.
Late Tuesday in New York, the euro was at $1.2781 compared with $1.2870 late Monday. The dollar bought ¥101.15, compared with ¥100.97, while the greenback bought 0.9730 Swiss franc, from 0.9636 franc late Monday.
The euro's tumble against the dollar reflects the divergent paths of ECB and Federal Reserve monetary policy. Fed Chairman Ben Bernanke said last month that the Fed may begin reducing its bond purchases before the end of the year, a prospect that has prompted a sharp rise in U.S. interest rates. That has boosted the appeal of the dollar, sending the greenback to multiyear highs against major and emerging-market currencies.
Meanwhile, the U.K. pound fell to a three-year low against the dollar. The pound has been under pressure after U.K. manufacturing output and industrial production both came in below expectations, which heightens the likelihood of further Bank of England stimulus. The central bank also indicated last week that the U.K. economy isn't strong enough for the bank to start raising rates.
The pound fell as low as $1.4813, its weakest level since June 2010. Late in New York, it was at $1.4866, down from $1.4951 late Monday.
