LONDON, March 12: The dollar plunged to new lows against the euro on Wednesday as the impact of central bank action to bolster ailing credit markets faded, leaving players focused on an expected cut in US interest rates next week.

The euro, driven by a report that industrial output in the 15-nation eurozone had risen a stronger-than-expected 0.9 per cent in January, jumped at one point to $1.5514, the highest reading since the creation of the single currency in 1999.

The euro was later at $1.5484 against $1.5333 late Tuesday.

The US currency was meanwhile at 102.38 yen, down from 103.42 on Tuesday.

Dealers said investors were re-assessing Tuesday’s move by the US Federal Reserve to inject $200 billion into money markets in order to get an acceptable level of bank credit flowing again.

The Fed action, carried out in concert with four other central banks, was made necessary in the face of a global credit squeeze brought on by the US subprime mortgage market crisis.

Initially the intervention was taken by investors as a signal that the Federal Reserve’s monetary policy meeting next week may not deliver the three-quarter-point cut in US interest rates that had been expected in some quarters.

Hans Redeker, currency strategist at BNP Paribas, said the central bank action was aimed at easing conditions in the credit markets, smoothing the way for improved transmission of monetary policy.

On the London Bullion Market, the price of gold rose to $975.50 an ounce from $970 late Tuesday. Last Thursday, the precious metal hit a record high of $992.05.—AFP