Euro dives as European bank pegs interest rates

The euro tumbled below $1.28 for the first time since March last year as the European Central Bank voted to keep eurozone interest rates on hold at 1%.

It also said it had not even talked about the possibility of buying government bonds to prop up the region. ECB president Jean-Claude Trichet said: "We didn't discuss the matter."

There had been calls for it to buy debt issued by stricken countries, such as Greece.

The euro, which would take a severe blow if a government defaulted, slipped 0.7% to $1.2739. It was as high as $1.51 late last year before the Greek crisis worsened.