The dollar slumped to an all-time low against the euro after a 16-year spike of inflation in the eurozone stamped out hopes of an interest rate cut while analysts expect new housing builds in the US to fall further.

The greenback fell to $1.5946 on the euro this morning when it emerged that European inflation rose from 3.3 per cent in February to 3.6 per cent in March, above expectations of a 3.5 per cent increase.

Last week, the European Central Bank (ECB) kept the interest rate unchanged at 4 per cent as the Bank of England cut the UK borrowing cost from 5.25 per cent to 5 per cent.

Jean-Claude Trichet, president of the ECB, said last week that he hoped that keeping the base rate unchanged would help encourage price stability and indicated that the interest rate would remain unchanged for some time. In contrast, the US Federal Reserve is expected to make a further cut to its interest rate, by at least a quarter point, when it announces its decision on April 30.

Adam Myers, director of market strategy at Credit Suisse, said the dollar could fall to as low as $1.62 against the euro, adding: "The ECB will continue to be hawkish as there's little evidence of a let-up in European inflation."

The dollar is expected to come under more pressure when the US reveals the level of new house builds which is forecast to fall by 5.2 per cent in March to an annual rate of 1.01 million homes. Yesterday, it was revealed that bank repossessions of US homes more than doubled in March while the number of foreclosures jumped by 57 per cent.

The owners of 234,685 US homes issued foreclosure filings last month, a 5 per cent rise on February, with the states of Nevada, California and Florida hit the hardest during the 12 months to March. Total bank repossessions soared 129 per cent from a year ago.

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