The dollar fell to a five-month low against the euro today amid mounting concern about a possible US economic downturn.
Yesterday's figures showing a fall in US manufacturing activity to the lowest levels in nearly 10 years reinforced fears of rapidly slowing growth and triggered a broad dollar sell-off.
The data knocked more than 7 per cent off the tech-heavy Nasdaq Index and 1.30 per cent off the Dow Jones Industrial Average.
"You had to go back a long time to see US data as bad as yesterday's and so far below expectations," said Mr Niels Christensen, currency strategist at Societe Generale in Paris.
"The growth outlook in Europe is looking better than the US outlook and that is hurting the dollar," he added.
The US National Association of Purchasing Management (NAPM) said yesterday its index of factory activity slipped to 43.7 in December after November's 47.7. This was the lowest since April 1991 and well below forecasts of a 47.0 reading.
But US government bonds rose sharply on the increasing likelihood the US Federal Reserve will cut interest rates to revive the slowing economy.
The Fed is expected to announce a rate cut of up to half a per cent at its next meeting at the end of this month.
Reuters