NEW YORK (Dow Jones)--The euro's decline against the dollar accelerated Thursday after European Central Bank president Jean-Claude Trichet sounded much less hawkish about the central bank's interest-rate intentions than he has in recent weeks. The euro fell swiftly against the dollar and yen as Trichet said current interest rates remain "appropriate" and the current policy stance is "accommodative." Trichet's remarks apparently toned down comments he made last month about potentially hiking interest rates to combat inflation. Those remarks had been a key catalyst in the euro's recent rally as traders priced in a rate hike later this year. With the toned down stance, market participants are backing off those expectations and selling the euro at the same time. "This is Trichet downplaying the need to raise rates," said Marc Chandler, global head of foreign exchange at Brown Brothers Harriman in New York. Investors were overextended in the euro and Trichet's comments led to a quick sell-off of the currency by investors who were long the common currency, Chandler said. The euro was at $1.3666 in morning trading in New York, from $1.3810 late Wednesday, according to EBS via CQG. The euro was at Y111.70 from Y112.64, while the dollar was at Y81.73 from Y81.55. The euro also fell to CHF1.2946 from CHF1.2982. Trichet's comments swiftly overshadowed U.S. economic data released around the same time. The government said first-time claims for unemployment benefits fell more than economists had forecast last week and that fourth-quarter productivity rose more than expected. However, unit labor costs dropped, signaling that inflation remains tame. Low inflation will allow the Federal Reserve to continue with its quantitative easing program, which has been a drag on the dollar.

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