NEW YORK, March 6, 2008 (AFP) – The dollar extended its losses against the euro on Thursday, tumbling to another record low after the European Central Bank left its rates unchanged and said fighting inflation was a priority.
The euro set a new all-time high of 1.5393 dollars before settling at 1.5381 dollars at 2200 GMT, up from 1.5268 dollars late Wednesday.
The ECB cut its projection for growth and increased its forecast for inflation. But bank president Jean-Claude Trichet made it clear that keeping inflation down in the medium term was “our primary objective.”
This indicated that the ECB would not cut rates soon, meaning the gap between European and US interest rates was set to widen as the Federal Reserve continues to reduce the cost of borrowing, analysts said.
“Mr. Trichet does not sound like a central banker who may be about to cut interest rates,” said an analyst at CIBC bank, Audrey Childe-Freeman.
Simon Derrick at the Bank of New York Mellon said the ECB chief had sounded more concerned about inflation and therefore less inclined to cut rates than many had expected.
“Trichet was undoubtedly more hawkish than people were expecting, and more hawkish than he has been at any time over the