The dollar slid to near a record low against the euro today as concerns over a US economic slowdown deepened and raised expectations of a cut in official interest rates.
Traders have been selling the dollar since Friday's surprisingly weak jobs report. Earlier the euro rose as high as $1.3830, nearing July's all-time highs above $1.3850.
But this afternoon it was up 0.1 per cent to $1.3823.
A speech from Federal Reserve chairman Ben Bernanke today may give clues about the central bank's response to rising recession fears ahead of next week's meeting of policy-makers.
Investors expect the Fed will cut its benchmark 5.25 per cent rate by at least 25 basis points at next Tuesday's meeting.
A hefty rate cut would erode the dollar's yield advantage, particularly against the euro and the low-yielding yen.
The dollar had limited reaction to a US Commerce Department report showing the US July trade gap narrowed to $59.25 billion, roughly in line with expectations.
Expectations of a Fed rate cut helped world stocks recover from a two-session slide, indicating some appetite for risk as investors look at equities as a barometer of risk taking.
Steadying equity markets halted safe-haven and repatriation flows, which had been beneficial to the dollar, and centred investors' attention on weak US employment and housing data.
Against the yen, the dollar was little changed, or 0.1 per cent higher, at 113.75 yen. Europe's single currency was up 0.3 per cent at 157.29 yen.
Also today, European Central Bank President Jean-Claude Trichet's will give a testimony on the credit crisis to a European Parliament committee. European central bankers have repeated their concerns about inflation, signalling the robust economy may warrant further rate hikes once markets return to normal.