Dollar hits new low against Euro

The dollar has fallen to new historic lows against the euro, this time sent reeling by a report suggesting intervention from the European Central Bank to halt the single currency’s rapid rise is some way off.

Quoting unnamed ECB sources, Market News, a financial news service, said the bank would not consider stepping into the market selling euros until it traded as high as $1.35, and even then, only if the rise was orderly. The ECB declined to comment on the report.

The market, which had been preparing for a relatively quiet session amid an absence of US economic indicators, and maybe even a slight recovery in the dollar, was rocked from its slumber.

Eventually taking out stiff options-related resistance at $1.2400, the euro surged to a new high of $1.2420, while sterling rocketed to a new 11-year peak of almost $1.77. Dealers reported aggressive buying from Asian central banks and Middle Eastern accounts in particular.

The dollar also slumped to a new seven-year low against the Swiss franc but managed to advance on the Australian and New Zealand dollars, which eased back after posting strong gains recently.

The dollar’s decline coincided with falling bond yields and a rise in gold prices to fresh eight-year highs.

“The biggest message that came from today is that there’s a tolerance level … a pressure point … but that hasn’t been reached yet,” said Tim Stewart, chief currency strategist at Morgan Stanley in New York. “There’s still more room on the euro upside.”

ECB chief economist Otmar Issing said that he was unconcerned with the strength of the euro, which has appreciated 10% since the Group of Seven’s September call for more “flexibility” in exchange rates.