The euro fell against the dollar Thursday following an interest rate cut by the European Central Bank while the pound moved higher against the euro after similar action by the Bank of England.

The single European currency in late-day trade was at 1.2763 dollars after 1.2962 late Wednesday in New York.

The dollar was meanwhile trading at 98.07 yen, down from 98.33 on Wednesday.

The pound edged higher against the euro at 80.54 pence from 81.35 pence.

Trading sentiment was heavily affected by European central bank decisions to slash key interest rates, with the Bank of England approving an unprecedented 1.5 point reduction to 3.0 percent, its lowest level in nearly half a century.

The ECB later followed suit with a much more modest half point reduction to 3.25 percent.

Both banks said they were reacting in the face of an increasingly grim economic climate, highlighted by the failure of stock markets to rally off the back of Barack Obama`s US election win.

And both institutions held open the possibility of further monetary easing in the face of deep-seated recession fears.

But investors were disappointed that the ECB action had been less aggressive than the Bank of England and the euro lost ground as a result.

`The ECB does not come across as pro-active/aggressive as the BoE,` said analyst Audrey Childe-Freeman of Brown Brothers Harriman.

`It`s all about rewarding pro-active central banking at the moment and today, the BoE... is the clear winner, leaving an underperforming tone in the euro.`

While inflation has eased in the 15-nation eurozone, it remains a concern for ECB policymakers, according to Elga Bartsch of Morgan Stanley.

`Together with sharp falls in commodity prices, the (economic) slowdown will push inflation back into the comfort zone in the course of the next year.

`That said, the ECB isn`t ready to yet to give an all-clear on inflation. Instead it views the upside risks to price stability as having diminished but not having completely disappeared. This assessment might explain the ECB`s reluctance to cut by a larger amount today.`

Traditionally a rate cut weakens the affected currency, making it less attractive to investors. But the pound on Thursday moved higher against the euro on hopes that action by the BoE will spur economic growth.

In London trade on Thursday, the euro changed hands at 1.2763 dollars against 1.2962 dollars late Wednesday, 125.41 yen (127.45), 0.8054 pounds (0.8135) and 1.5003 Swiss francs (1.5011).

The dollar stood at 98.07 yen (98.33) and 1.1732 Swiss francs (1.1578).

The pound was at 1.5879 dollars (1.5930).

On the London Bullion Market, the price of gold fell to 739.55 dollars an ounce from 753.75 dollars late on Wednesday.