The euro hit eight-week lows against the dollar today to extend losses after the European Central Bank chief said the bank would not use "strong vigilance" in setting monetary policy.
The ECB left interest rates unchanged as expected, but in his post-meeting press conference, ECB president Jean Claude Trichet said the bank would act in a "firm and timely way" but would not use "strong vigilance" when watching monetary developments.
Traders interpreted this statement as a signal that the bank may not raise interest rates again in February, as markets had previously expected.
The euro fell to a session low of $1.2925, according to data from electronic trading platform EBS, its lowest since the third week in November.
It was last at $1.2938, virtually flat on the day. Against the yen the euro rose to 155.64 yen, up 0.5 per cent on the day.
The euro extended losses against sterling, falling nearly 0.8 per cent to 66.43 pence, as the pound rose after the Bank of England unexpectedly raised UK rates to 5.25 per cent earlier in the day.