NEW YORK: The euro fell 1 percent on Thursday, surrendering most of the solid gains put up against the dollar since China devalued the yuan last month, after European central bankers cut economic growth targets and left interest rates unchanged.
The dollar rallied, helped by weekly jobless data signalling a strong US labor market the day before Friday's August jobs report, which may be crucial for Federal Reserve policymakers considering raising interest rates.
The European Central Bank lowered its forecasts for inflation and economic growth, citing a slowdown in emerging markets and weaker oil prices.
ECB President Mario Draghi warned conditions could worsen. The revisions raise doubts about the effectiveness of the ECB's $1 trillion euro asset-buying program, which is aimed at stimulating growth and boosting consumer prices after years of low inflation.
Draghi said inflation risks remained to the downside, mainly because of plunging crude oil prices, and that the bond-buying program would run at least another year.
"Draghi at his press conference raised the risk of additional monetary support by the central bank," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington.
"We were expecting some dovish comments, and he delivered."
Against the dollar, the euro touched a two-week low of $1.1108 during Draghi's news conference and was last off 0.70 percent at $1.1148. It was as high as $1.1332 earlier this week as investors spooked by markets turmoil in China moved heavily into the euro and yen.
The euro also sank against the yen and was last down 1 percent at 133.60 yen.
The greenback was also up against most other major currencies, with the dollar index last ahead 0.45 percent.
The dollar declined 0.35 percent against the yen to 119.92.
Weekly jobless claims data bolstered optimism about US economic growth, as did a government report showing the US trade deficit fell in July to a five-month low on a broad rise in exports.
Meanwhile, the Swedish crown surged to a six-week high of 9.3755 crowns per euro after Sweden's central bank kept rates unchanged.
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