The euro surged to a record high of $1.4064 today as the US interest rate cut earlier in the week continued to exert downward pressure on the greenback.
The breach of the psychologically key $1.40 level - heralded as a pain barrier for euro zone exporters - came in early European trade, with the move taking out key stop-loss and option barriers and fuelling a broad-based euro rally.
The single European currency also rose above 70 pence sterling for the first time in 18 months.
Earlier this morning, the euro had risen to all-time highs of $1.4064, up 0.5 per cent on the day. The yen was also up half a per cent at 115.52 per dollar. The dollar also set 15-year lows against a basket of six major currencies, at 78.791.
The US Federal Reserve slashed interest rates by 50 basis points last Tuesday to 4.75 per cent in a bid to shield the US economy from a deepening housing slump and credit market turbulence.
Investors are now looking to comments from Fed Chairman Ben Bernanke, who speaks later today, for further clues on the outlook for US monetary policy.
Investors expect more Fed cuts in the months to come while rhetoric from the European Central Bank suggests it could resume raising rates once calm return to financial markets.
Sterling edged higher versus the dollar after Bank of England Governor Mervyn King said that cutting interest rates at first sight of every problem was not the way to go.