The dollar fell to a fresh record low against the euro yesterday as the prospect of further cuts in US interest rates continued to weigh on the currency.
Last week the Federal Reserve cut US interest rates by 50 basis points to 4.75 per cent, a more aggressive move than most investors had been expecting.
"The downside risks to growth are clearly dominating the Fed's views at present, and developments in the data are likely to drive the decision of whether to cut rates again this year," said David Woo at Barclays Capital.
He said the focus of the market's attention would be the US housing market. "We expect some further bad news from this sector over the next month, which could increase the market's pricing of aggressive Fed easing in the months ahead and be negative for the dollar."
The dollar fell to a record low of $1.4130 against the euro before pulling back to $1.4105, still down 0.1 per cent during the session. The dollar also lost ground against the yen and sterling.
The pound made progress against the euro, rising 0.2 per cent to £0.6968. However, Hans Redeker at BNP Paribas said he remained bearish on the pound in the medium term. While the pound's downside would be limited against the weak dollar, he expected the euro to reverse its losses against sterling.
