Investing.com - The euro reversed gains on Wednesday, retreating from one-year highs after the European Central Bank said the market misinterpreted remarks by President Mario Draghi a day earlier.
EUR/USD was at 1.1327 by 12.51 GMT (08.51 ET) after earlier rising as high as 1.1388, the strongest level since June 24 2016.
The euro surged 1.39% against the dollar on Tuesday, its biggest one-day percentage gain since last June.
The euro reversed gains after Bloomberg reported that ECB sources said market misinterpreted Draghi's remarks.
The speech "was intended to strike a balance between recognizing the currency bloc's economic strength and warning that monetary support is still needed" Bloomberg said.
Speaking at the ECB’s central banking forum in Portugal on Tuesday, Draghi said factors weighing on inflation in the euro area were mainly temporary, adding that the bank could look through them.
The remarks fueled speculation that the ECB could soon unwind its quantitative easing program.
Draghi also said the ECB sees growth that is above trend and well distributed across the euro area, but reiterated that “a considerable degree” of stimulus is still needed in the euro zone, and that the ECB must be “prudent” in how it unwinds it.
The euro pared back gains against the yen, with EUR/JPY down 0.35% to 126.94, off the 14-month peak of 127.86 set overnight.
The single currency also turned lower against sterling, with EUR/GBP sliding 0.2% to 0.8830 from an earlier high of 0.8880.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last at 96.15 after falling to 95.92 earlier, the lowest level since November.
The dollar remained on the back foot after Senate Republican leaders postponed a vote on a sweeping healthcare reform until after Congress’ July 4 recess, in order to get more time to gather support for the bill.
The delay rekindled concerns over the Trump administration’s ability to push through tax cuts and fiscal stimulus plans, without first getting the healthcare bill passed.
Investors were also digesting remarks by Fed Chair Janet Yellen, who reiterated Tuesday that the U.S. central bank would continue to gradually raise interest rates.
Markets have been closely watching speeches from Fed officials after the bank stuck to its projection for one more rate hike this year at its meeting earlier this month despite the subdued inflation outlook.
Recent weakness in economic data has raised questions over the Fed’s plans to tighten monetary policy, with investors now expecting that the pace of its tightening could be much slower than policymakers want.