NEW YORK (AFP) - The euro hit an all-time high against the greenback, reaching over 1.30 dollars, but then retreated after the Federal Reserve boosted US interest rates and suggested more hikes to come.
After peaking at 1.3005, the single European currency slipped back to 1.2894 dollars at 2200 GMT from 1.2897 late on Tuesday in New York.
The dollar fetched 107.08 yen from 105.65 on Tuesday.
The dollar got some relief after the release of data showing the US trade deficit was unexpectedly cut to 51.6 billion dollars in September from 53.5 billion in August. The figure was much better than analyst forecasts for a trade deficit of around 53.8 billion dollars.
The Federal Reserve lifted its target interest rate for the fourth time this year, to two percent, and said it would continue with a measured pace of hikes.
"The Fed did what was expected and my read is it was an optimistic statement that suggests another rate hike in December," said Mike Malpede, currency analyst with Refco in Chicago. Higher rates would presumably boost the allure of dollar-denominated assets to foreign investors, helping the United States to finance its near-record US trade deficit.
Rob Nichols, spokesman for Treasury Secretary John Snow, said, "There has been no change in our currency policy.
"Secretary Snow has stated the strong dollar policy remains unchanged. There is no change in the US policy."
Meanwhile there was talk in Europe about intervention to keep the euro from rising too far -- which could hurt the eurozone economies.
French Prime Minister Jean-Pierre Raffarin said that "the dollar crisis, the collapse of the dollar is a real problem".
"I really hope that the international community learns the lessons of the situation because the dollar is too low, and that does not correspond today to the state of different economies," he added.
Italian Economy Minister Domenico Siniscalco said the Group of Seven industrialized countries was considering coordinated intervention on currency markets to stabilize foreign exchange rates.
"We are talking again about intervention, not unilateral but a coordinated intervention," he said.
The dollar's slide in recent weeks, and indeed months, has been fuelled by ongoing concerns about the US' ability to fund its trade gap.
In late New York trade, the dollar stood at 1.1808 Swiss francs from 1.1829 Tuesday.
The pound was at 1.8470 dollars from 1.8576 late on Tuesday.
11/10/2004 - 22:55 GMT - AFP