The dollar hit a seven-month low against the euro this morning, extending losses made after minutes of the Federal Reserve's March meeting suggested the central bank was close to ending a two-year run of raising interest rates.
Amid a broad sell-off, the dollar also slipped to a fresh three-month trough versus the Swiss franc, stung by the minutes as well as softer-than-expected data for US producer prices and housing starts.
The minutes from the March 27-28th policy meeting said: "Most members thought that the end of the tightening process was likely to be near, and some expressed concerns about the dangers of tightening too much, given the lags in the effects of policy."
At the meeting, the first under new Chairman Ben Bernanke, the Fed raised the overnight rate to 4.75 per cent, its 15th straight quarter percentage point increase since June 2004.
The market still expects another rise at the next meeting in May, but the minutes reduced the prospects for a further tightening beyond that, traders said.
Helping to cement such expectations, San Francisco Fed President Janet Yellen said yesterday that the Fed was "highly alert" to the possibility of too much monetary tightening.
For more clues about the direction of US rates, the market was looking to consumer prices data for March due later in the session, traders said. Economists expect a 0.4 per cent rise in prices from February, when the edged up 0.1 per cent.