The dollar gained on Wednesday, pushing the euro to a fresh two-year low after minutes of last month's Federal Reserve meeting showed additional asset-buying by the Fed was not imminent and likely to occur only if US economic conditions worsened.
The report showed a few officials on the policy-setting Federal Open Market Committee believed further stimulus to the economy was justified, but a majority was not yet convinced.
"On balance, the minutes do not on the surface suggest a sizable body of support for further immediate action, although it should be borne in mind that the comments were made prior to recent data disappointments," said Peter Buchanan, economist at CIBC World Markets in Toronto.
The euro hit a two-year low of $1.2211 after the minutes, but was last at $1.2237, down 0.1 percent. The next target on the downside is $1.20, and after that, a possible test of the June 2010 trough of $1.1875.
The single currency has fallen about 5.5 percent so far this year, exceeding losses racked up in 2011, when it fell more than 3 percent. Yet many analysts feel it is not time to buy the euro.
"Our instincts still tell us that investors will continue to sell into euro rallies for now," said Valentin Marinov, senior currency strategist at Citigroup in London.
The dollar index was up 0.1 percent at 83.450, aided by the greenback's gains versus the yen. The euro also fell against most major currencies on unease over how policymakers will tackle the debt crisis after it appeared there would be no quick judgement from a German court on the euro zone's bailout fund.
The single currency also dropped to a three-and-a-half-year trough against sterling and a record low versus the higher-yielding Australian dollar.
Analysts said any renewed rise in Spanish and Italian government debt yields could push the euro down further as concerns about political hurdles and skepticism over the euro zone's decision-making process grow.
The ECB's rate cut removed a pillar of support for the euro, raising chances it could become a funding currency of choice for buying higher-yielding assets.
The euro fell to its weakest against sterling since late 2008 at 78.68 pence, while it hit an all-time low against the Australian dollar at A$1.1937.
Some market players had been hoping for a quick ruling from Germany's Constitutional Court on whether the European Stability Mechanism and planned changes to the euro zone's budget rules were compatible with German law.
The euro fell to a five-week low against the yen but recovered to trade 0.3 percent higher at 97.54 yen. The dollar was up 0.3 percent against the yen at 79.64 yen, holding well above chart support at its 200-day simple moving average at 78.98.
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