LONDON: The euro fell against the dollar on Thursday as German inflation appeared to have softened more in November, reinforcing expectations that the European Central Bank will ease monetary policy more aggressively.
Oil-rich Norway's crown hit a three-week low of 8.6350 per euro as OPEC looked unlikely to cut oil output despite a huge oversupply, sending Brent crude to a four-year low below $76 a barrel.
Though data showed German consumer sentiment picking up, regional numbers from the euro zone's biggest economy showed annual inflation slowing in three states and steadying in a fourth, pointing to a weak nationwide reading, due at 1300 GMT.
A Reuters poll ahead of the data called for a fall to 0.6 percent, but at least one economist said the domestic numbers indicated the fall would be deeper.
Spanish consumer prices fell by 0.5 percent year-on-year, fuelling concerns that deflation is taking hold in the bloc's fourth-largest economy.
"(Low) inflation is a real concern - it is the core reason for stimulus measures," said Neil Jones, head of hedge fund FX sales at Mizuho in London. "It adds fuel to the QE fire and in the longer-term that weighs on the euro."
The euro fell back under $1.25, having traded as high as $1.2524 earlier in the day. It was last down 0.2 percent at $1.24865.
Preliminary data on Friday is expected to show euro zone-wide inflation slowing to 0.3 percent, deep into the ECB's "danger zone" of under 1 percent.
European Central Bank President Mario Draghi said last week that buying sovereign bonds was an option to ward off deflation. Vice President Vitor Constancio said on Wednesday the bank could decide on such a move as early as the first quarter of 2015.
U.S. financial markets are closed for Thanksgiving and many U.S. traders may take Friday off too.
The dollar hit an eight-day low against the yen of 117.24 yen, continuing its retreat from a seven-year high hit last week, after lacklustre U.S. data on Wednesday.
"Market participants are taking this opportunity to trim some of their accumulated dollar long positions. As far as dollar/yen is concerned, there is also firm bargain-hunting demand on dips," said Junichi Ishikawa at IG Securities in Tokyo.
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