The euro continued to fall against the dollar as investor unease over the inconclusive elections in Italy continued to affect markets, with the single currency hitting its weakest level since the start of the year.

The euro hit a daily low of $1.3017, its lowest level in more than seven weeks, after it emerged that no one party won a clear victory in Italy, paving the way for further uncertainty over the pace of the country’s plans to implement austerity measures. The single currency later pared its losses to close little changed on the day at $1.3059.

The Japanese yen continued to strengthen against other major currencies as investors closed positions in European equities and peripheral bonds.

The dollar fell 0.1 per cent to Y91.74 while the euro dipped below Y119.

The dollar rose against other major currencies amid uncertainty over how long the US Federal Reserve would continue to buy $85bn a month in bonds to stimulate the US economy.

Ben Bernanke, Fed chairman, said in testimony before the Senate Banking Committee that the benefits of monetary easing still outweighed the costs.

But analysts said some investors had been expecting an even more dovish statement from Mr Bernanke. “The market reaction shows some slight disappointment that he did not show even more dovish inclinations,” said Alan Ruskin, foreign currency strategist at Deutsche Bank.

“More important, fears of a dovish Bernanke were seen [to be] holding the US dollar back and there will be a little more freedom post-Bernanke to express positive US dollar views.”

The dollar index rose 0.2 per cent to touch a fresh six-month high after making strong gains the previous day.

The UK pound came under pressure after a member of the Bank of England’s Monetary Policy Committee hinted that the central bank was seriously considering further purchases of government debt through quantitative easing to boost UK growth and said the Bank had also considered less orthodox measures.

The pound fell 0.2 per cent to $1.5126 against the dollar and was later flat against the euro at €1.16.

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