The dollar slid to a 15-year low against a basket of currencies today after data showing US employers cut jobs for the first time in four years.
The dollar's trade-weighted index against six major currencies fell to a low of 79.826, the lowest since September 1992. It later pared its losses and traded at 79.927.
The euro edged up to $1.3785, moving back towards record highs above $1.3850 struck in July.
The dollar fell to as low as 112.60 yen on electronic trading platform EBS early today but cut its losses on buying by Japanese importers and stood at 113.31 yen.
Friday's data showing companies cut 4,000 jobs last month, the first such decline since August 2003, leading investors to see a bigger chance the Fed will cut rates by 50 basis points next week to protect the economy from the housing market crisis.
Investors again sold the dollar today after the unexpected drop in US jobs.
Analysts believe the Fed may opt for an unusually big cut in rates from the current 5.25 per cent to help restore confidence among banks, which have become reluctant to lend to each other, leading to strains in money and credit markets.
The Fed usually moves in 25 basis point increments, but worries about exposures and commitments of banks to US subprime mortgages, asset-backed commercial paper and structured investment vehicles has caused money market trading to dry up.