[NEW YORK] The euro reversed course to trade lower against the US dollar on Thursday after traders saw potential for the European Central Bank to eventually increase its stimulus measures if necessary, while the yen rebounded on flagging risk appetite.
The euro was last down 0.04 per cent against the US dollar at US$1.1290, near a session low of US$1.1271, after hitting a nine-day high of US$1.1394 on the back of comments from ECB President Mario Draghi.
Mr Draghi, speaking after the ECB held key interest rates steady, brushed off German criticism of his ultra-loose monetary policy and vowed to use all the tools at his disposal for "as long as needed."
The euro initially rallied on the view that the ECB would not add to its stimulus measures soon, but the growing belief that the central bank could ultimately increase those measures later helped pushed the common currency lower.
"Markets are convinced that the ECB will do more if it becomes necessary," said Sireen Harajli, currency strategist at Mizuho Corporate Bank in New York.
Some analysts also said markets were looking ahead to the Federal Reserve's policy meeting next week, anticipating strength in the US dollar if the central bank issued a hawkish statement.
Fed funds futures contracts on Thursday suggested traders were pricing in just a 23 per cent chance of a Fed interest rate hike at the June meeting, according to CME Group's FedWatch program. Fed rate increases are expected to boost the US dollar by driving investment flows into the United States.
The US dollar slipped against the safe-haven yen for the first time in four days as a surge in risk appetite stalled.
US stocks, which flirted with record high levels on Wednesday, fell on Thursday, while oil prices also dropped.
The US dollar was last down 0.35 per cent against the Japanese currency at 109.44 yen, easing from a more than two-week high of 109.89 yen hit earlier in the session.
"We're a bit skeptical of this risk rally continuing to perform well," said Andres Jaime Martinez, FX and rates strategist at Barclays in New York.
The dollar index, which measures the greenback against a basket of six other major currencies, was last up 0.11 per cent at 94.592.
The US dollar was last up 0.23 per cent against the Swiss franc at 0.9740 franc, near a more than three-week high of 0.9751 franc.