The euro hit another record high against the dollar today, reaching $1.3927 as investors braced for an expected Federal Reserve interest rate cut next week.
The dollar has been under pressure since Friday, when an unexpectedly weak US jobs report fuelled speculation that the Fed may cut rates by as much as 50 basis points on September 18th from the current 5.25 per cent.
"There is no great incentive for players not to sell the dollar, at least until we see the Fed move next week. I cannot imagine anything that could help the dollar today," said Roberto Mialich, FX Strategist at UniCredit in Milan.
"After the dreadful payrolls number on Friday the market is betting on a U.S. recession and wants to see the size of the Fed move. In addition, we have the ECB continuing to stress that once the credit crisis has played out further tightening might emerge in Europe," he added.
The dollar has slid below the 80 level on the trade-weighted index against six major currencies as investors have shunned the US currency, driving the euro to an all-time peak above $1.39.
But traders said the dollar was getting a slight lift in Asia as investors took profits on its steady slide, even as the outlook remained negative.
The Fed is widely seen cutting rates by 25 or 50 basis points from 5.25 per cent at Tuesday's meeting to help relieve a squeeze in money markets, a move that would erode the dollar's yield appeal.
As some markets show signs of calming from the upheaval of the past few months on worries about funds suffering losses from US subprime mortgages, the focus has shifted back to the US economy's housing-led deterioration.