The dollar sank to a new lifetime low against the euro today after a warning by European officials on the euro's rise went unheeded by investors determined to dump the US currency.
In a joint statement yesterday, the European Central Bank and euro zone finance ministers gave their sternest warning to date that they were unhappy with the euro's strength.
But the dollar, under pressure from concerns about the massive US current account deficit, touched an all-time low near $1.3468 and a 12-year low against sterling beyond $1.95 early in the European session.
"The comments from the (euro group) meeting were largely repeating previous statements and they are not going to stem the current rise in the euro," said Mr Ian Stannard, foreign exchange strategist at BNP Paribas.
Mr Stannard also said a report in the Wall Street Journal Europequestioning the US government's triple-A bond rating hurt the dollar.
The dollar initially bounced after the euro zone finance ministers' statement yesterday saying that sharp moves in exchange rates were unwelcome and that they were closely monitoring swings.
The comments fuelled jitters over potential central bank intervention in the currency markets.
The dollar has shed roughly 9 per cent against the euro and the yen in the past two months. A softer dollar risks eroding the performance of exporters in Japan and the euro bloc by making their goods and services more expensive in dollar terms and denting the value of their overseas earnings.
Markets are waiting for the release of the German ZEW economic forecast for December at 10 a.m. to see how a rising euro is hurting economic sentiment.