New York: The euro fell against most of its major counterparts after a liquidity injection by the European Central Bank failed to convince investors that the region's crisis is abating.

The 17-nation currency weakened last week as 800 financial institutions borrowed a record amount of three-year loans from the ECB, which is expected to leave its benchmark interest rate unchanged March 8.

The dollar rose to a nine-month high versus the yen after Federal Reserve Chairman Ben S. Bernanke cast doubt on a third round of asset purchases. Canada's dollar and Mexico's peso rallied as oil surged to a ten-month high.

"The euro is now more vulnerable to selling against some of the higher-yielding currencies," said Omer Esiner, chief market analyst in Washington at the currency brokerage Commonwealth Foreign Exchange.

"Bernanke didn't comment much about policy easing and that's been interpreted as a subtle sign that continued improvement in the data may prompt the Fed to adopt a more neutral policy stance. That would be good for the dollar."

The euro dropped 1.9 per cent to $1.3198 and reached $1.3187 on Friday, matching a low from February 21. The shared currency lost 1.1 per cent to 107.97 yen after February 27 touching 109.93, the highest since October 31. The dollar strengthened 0.8 per cent to 81.81 yen, rising for a fourth straight week in its longest such stretch since November 2010.

Rallied

Canada's dollar and Mexico's peso were boosted as the nations' largest export, crude oil, rallied. Oil for April delivery reached $110.55 (Dh406) a barrel March 1, the highest level since May.

The Canadian dollar advanced one per cent to 83.97 cents per US dollar and the Mexican peso appreciated 1.1 per cent to 12.7599 against the greenback, the biggest gainer among the 16 major currencies tracked by Bloomberg.

South Africa's rand and the Australian dollar rallied after reports showed manufacturing from China to the US expanded in February, increasing speculation that global growth is on the mend.

China's purchasing managers' index rose for a third month in February, increasing to 51 from 50.5 in January, the statistics bureau and logistics federation said last week.

The Institute for Supply Management's US factory index fell to 52.4 in February from 54.1 in the prior month, the Tempe, Arizona-based group's data showed March 1. Readings above 50 signal growth.

Germany's statistics bureau said retail sales adjusted for inflation and seasonal swings fell 1.6 per cent in January. Euro-area retail sales dropped for a third month in January, the European Union's statistics office will say tomorrow, another Bloomberg survey showed.

The ECB will keep its benchmark interest rate at a record low one per cent on March 8, according to a separate survey.

Intercontinental Exchange's Dollar Index, used to track the greenback against the currencies of six major US trading partners, gained 1.3 per cent to 79.449. The increase is the biggest since the five days ended December 16 and came after Bernanke's comments in a Congressional testimony damped speculation the Fed will introduce another round of asset purchases.

"We have seen some positive developments in the labour market," Bernanke said in prepared testimony to the House Financial Services Committee in Washington.

‘Sugar Rush'

The ECB on February 29 awarded €529.5 billion (Dh2.56 trillion) in a second round of three-year loans to banks, increasing the supply of euros in the market. The euro weakened 3.6 per cent in December, during which the central bank held its first three-year refinancing operation, lending €489 billion to 523 banks.

"Markets have pulled back after the sugar rush we've had from the second longer-term refinancing operation," Jeremy Stretch, head of currency strategy at Canadian Imperial Bank of Commerce in London, said in a radio interview on Bloomberg Surveillance with Tom Keene. "There is still a great deal of uncertainty, which has been highlighted by the market as we start to see the euro under pressure again."