The dollar hit a new record low against the euro and a nine-year low as investors continued to shun the greenback on worries over the United States' bloated deficits.
The dollar fell as low as $1.2985 to the euro in early trade, and analysts said it was only a matter of time before it dropped through the pyschologically important $1.30 level.
"The US has a current account deficit, a budget deficit and a president who appears unconcerned about dollar weakness," said Mr Shahab Jalinoos, senior currency strategist at ABN AMRO. "No one can see any reason to buy the dollar at the moment."
The latest leg of dollar weakness began last Wednesday as investors took the view the administration of re-elected President George W. Bush would do little to alleviate the United States' twin deficits.
The US budget deficit is about $427 billion, or 3.7 per cent of gross domestic product, while its current account - the broadest measure of trade - hit a record $166.18 billion shortfall in the second quarter.
The dollar's weakness was broad based with the US currency hitting a nine-year low against a basket of currencies below 83.80, a 12-year low against the Canadian dollar and multi-month lows against sterling and the yen.
Top central bankers meeting in Basel said they were keeping a wary eye on currencies, but analysts said Japanese and euro zone policymakers were unlikely to step into the market to stop the dollar's fall at this stage.
The dollar fell to 105.30 yen in early European trade, its lowest since April but still some way off this year's low below 103.40 yen. Japan intervened heavily on the foreign exchanges, selling about 35 trillion yen ($332.2 billion) in 2003 through to March this year.
But analysts say Tokyo is unlikely to repeat such a large scale campaign given the Japanese economy is now in better shape.