The dollar was under pressure on Thursday after a run of appalling US data and strong hints from Federal Reserve policymakers that US interest rates were to be cut in March.

The US currency fell dramatically on Wednesday, hitting record lows against the euro and Swiss franc, and multi-year troughs against the so-called commodity currencies of Australia and New Zealand.

Federal Reserve chairman Ben Bernanke reinforced expectations of a US rate cut next month, saying he would act in ”a timely manner to provide adequate insurance against downside risks” to economic growth.

With the Fed’s aggressive rate cuts set to continue and the European Central Bank’s attention focused on inflation, the euro hit a record high of $1.5143 on Wednesday, but retreated 0.2 per cent on Thursday back to $1.5095.

The dollar’s retreat prompted a spike in commodity prices, with record highs being hit for oil and gold on Wednesday.

Strategists at BNP Paribas addressed these concerns: ”A vicious circle seems to be in place again where a lower dollar inspires raw material prices to rally, which in turn increases worries within inflation targeting central bank’s such as the ECB.”

European data was broadly supportive of the euro, with a fall in German unemployment overshadowing a record low in French consumer confidence.

Meanwhile, the Swiss franc was back at a new record. The dollar fell as low as SFr1.0614 against the Swissie before climbing back to SFr1.0631 - unchanged on the session.

Sterling was still hobbling after the euro hit a record against the UK currency on Wednesday.

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