The euro soared Wednesday to the highest level in its nine-year history, climbing above US$1.51 after markets took comments from the United States Federal Reserve chairman as a sign that yet more rate cuts are on the way.

The 15-nation euro topped US$1.50 for the first time since its 1999 introduction in Asian trading, then surged in Europe after Fed Chairman Ben Bernanke told the House Financial Services Committee that "the economic situation has become distinctly less favourable" since last summer.

That added to sentiment that the Fed is likely to add to recent rate cuts that already have left US interest rates below the euro zones.

The euro surged to US$1.5143 after Bernanke's testimony - well above the US$1.4967 it bought in New York late Tuesday.

It later settled back to US$1.5124.

Driving down the dollar

Lower interest rates can jump-start a nation's economy, but can weigh on its currency as traders transfer funds to countries where they can earn higher returns. Worries about the US economy have helped drive down the dollar for months.

Since Bernanke's last similar assessment, the US housing slump has worsened, credit problems have intensified and the job market has deteriorated.

Bernanke said those factors combined to make people and businesses alike more cautious toward spending and investment - further weakening the economy.

- AP