The euro plunged Thursday after the head of the European Central Bank said long-term inflation in the 17-nation euro region was still in check. Stronger economic data in the U.S. also supported the dollar.
Investors had expected ECB President Jean-Claude Trichet to toughen up his warning on rising prices, which would signal that the ECB was closer to lifting interest rates than the other major central banks. The ECB left rates at 1 percent for the 21st straight month. Higher rates tend to support a currency.
The euro fell to $1.3639 late Thursday from $1.3798 Wednesday, retreating from a three-month high of $1.3861 struck on Wednesday. The euro has moved higher since early January after a long decline sparked by Europe's debt crisis. Previous comments from Trichet warning about inflation and investors' hopes that European Union policymakers will announce a better plan to counter the debt crisis has buoyed the shared currency.
EU leaders are meeting Friday, and may announce a plan then.
The dollar also rose broadly against other currencies after a slew of positive economic reports. The data showed that the U.S. service sector expanded at the fastest pace in five years in January, according to the Institute for Supply Management trade group, while orders to factories increased in December and retailers posted better-than-expected sales gains in January.
The positive economic news comes a day before the U.S. government releases a key jobs report. Economists expect it to show that employers added 146,000 jobs in January. A significantly stronger reading could catapult the dollar.
In other trading Thursday, the U.S. dollar was higher against most currencies.
The British pound dropped to $1.6148 from $1.6166, retreating from a three-month high of $1.6277 earlier in the day. The U.S. currency rose to 99.02 Canadian cents from 98.84 Canadian cents, and gained to 0.9450 Swiss franc from 0.9420 Swiss franc.
Meanwhile, the U.S. dollar remained flat at 81.63 Japanese yen Thursday.
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