The dollar fell to a record low against the euro today and a four-year low versus the yen as traders seized on a report that China has reduced its US Treasury bond holdings.
The report in Shanghai-based China Business News quoted a member of the Chinese central bank's monetary policy committee as saying the country had trimmed its Treasuries in foreign exchange reserves to $180 billion, trying to minimize losses from a falling dollar.
While skeptical of the report, market players still jumped on it as more proof the dollar's sharp slide is a long way from over, with no sign of central banks standing in the way.
"I think the China story's going to have some legs," said Luke Waddington, head of forex trading at Royal Bank of Scotland in Tokyo.
"People don't really need any reasons to sell the dollar. If they are given a reason it's just putting petrol on the fire."
The dollar fell to a record low against the euro of around $1.3330. Against the yen, the dollar fell to its lowest level since March 2000 at 102.15 yen, though a prominent electronic platform had quoted it at 102.01 yen.
Pound sterling hit a nine-month high above $1.90 and is approaching a 12-year peak beyond $1.9142.
The dollar has lost nearly 9 percent against the euro and yen since early October as traders have speculated that the US prefers a weaker currency to deal with its record-breaking current account deficit.
China closely guards the make-up of its foreign exchange reserves, which hit nearly $515 billion at the end of September and are the world's second-largest.
But the bulk of that is presumed to be in US Treasuries, and US Federal Reserve data has showed ongoing purchases of US government bonds by foreign central banks over the past six months.
Speculation that China could soon revalue its pegged yuan currency and let it strengthen against the dollar has also captivated market attention, especially ahead of an annual meeting of China's top economic officials in Beijing over the weekend.
But while the yuan was expected to be discussed at the meeting, many in the market believed long-term issues would be the focus of the meeting and few thought a near-term revaluation was a possibility.
China has come under intense pressure to revalue the yuan, which is pegged near 8.28 to the dollar. Countries like the United States have complained that the rate is too low, making Chinese exports unfairly cheap.
While the investors and traders have been on alert for potential central bank intervention to support the dollar, so far verbal warnings from European and Japanese officials have been shrugged off.
The Japanese Finance Minister Sadakazu Tanigaki repeated his warning against dollar weakness today, threatening to take action against sudden moves, but market participants said such verbal intervention had long lost its clout.
"At this point verbal intervention isn't going to stop the dollar's fall," said Hideaki Furumaya, currency manager at Trust and Custody Services Bank.
Right at the start of Asia trade the dollar suffered after the Bank of England's chief economist Charles Bean said the dollar's fall still had some way to go.