The euro fell to the lowest level in seven weeks against the dollar as European Central Bank president Mario Draghi reiterated his commitment to providing unprecedented stimulus to the euro area.

The currency weakened versus all but two of its 16 major peers after Mr Draghi said the central bank increased emergency liquidity assistance to Greece yesterday.

Mr Draghi said in Frankfurt that recent market uncertainty had not changed the economic outlook of the region and full implementation of stimulus measures, including a €1.1 trillion bond-buying programme, would push inflation back towards target.

“The market was already expecting a dovish tone,” said Athanasios Vamvakidis, head of Group-of-10 currency strategy at Bank of America Merrill Lynch in London. “The increase of the ELA is good news but is not enough to offset how market wants to trade the euro at this point. And Draghi did mention earlier the ECB is willing to do more if needed in terms of policy easing. That’s euro negative.”

The euro dropped 0.4 per cent to $1.0904 in early trading in New York and touched $1.0856, the lowest since May 27th. It weakened 0.2 per cent to 135.18 yen.

The ECB started its quantitative-easing (QE) programme in March, a policy intended to boost growth and consumer prices in the region. A gauge of the outlook for inflation dropped for a third day amid a decline in oil prices.

The five-year, five-year forward inflation swap rate, a market metric identified by Draghi as a benchmark for the euro area’s inflation outlook, fell one basis point, or 0.01 percentage point, to 1.80 per cent.

The ECB targets price growth at just below 2 per cent. The Frankfurt-based ECB kept its refinancing rate at a record-low 0.05 per cent and the deposit rate at minus 0.2 per cent, as predicted by economists in separate Bloomberg surveys.

Mr Draghi said that implementation of QE was proceeding “smoothly.” – (Bloomberg)