Dollar gains against euro, yen
Greenback rises after European Central Bank holds rates steady and Bank of England cuts to historic lows.
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NEW YORK (CNNMoney.com) -- The dollar rose against the euro and lost ground against the pound Thursday after the European Central Bank held interest rates steady and the Bank of England cut its key rate by half a percentage point.
The U.S. currency was up against the yen.
ECB President Jean-Claude Trichet hinted last month that the bank would suspend its rate-cutting campaign until March. Still, a series of weak economic reports from the euro area this week, including a drop in German manufacturing orders, led some investors to believe that the ECB would consider a cut.
The Bank of England, however, cut its rate to a historic low of 1% from 1.5% at its meeting on Thursday. The move was also widely anticipated, but the British pound still gained sharply against the dollar. Major U.K. lender Halifax reported that house prices rose 1.9% in January.
In normal market conditions, traders sell off a nation's currency when its central bank cuts interest rates, as investors tend to value currencies with higher-yielding interest rates. But that trend has recently reversed.
"The market is rewarding currencies whose central banks are promoting a pro-growth policy," said Dustin Reid, senior currency strategist at Royal Bank of Scotland. "Investors are looking to see what country can lead the path to an economic recovery. It's almost a race to 0% interest rates."
The euro, the currency of 16 nations, fell 0.31% to $1.2812 from $1.2849 late Wednesday.
The pound rose to $1.4639, up 1.19% from $1.4468.
The dollar rose to ¥91.24, up 2.03% from ¥89.43 late Wednesday.
"The dollar-yen trade has been very choppy recently, since traders go to both for risk-aversion purposes," said Reid. "Trade has been very sticky between ¥87 and ¥90, and there is a lot of concern that the Bank of Japan may intervene if the dollar-yen moves below ¥87." 
