The dollar tumbled against the euro this afternoon after the Federal Reserve unexpectedly slashed its benchmark overnight lending rate in an attempt to allay market fears of a US recession.
The Fed's emergency move to cut rates by three quarters of a percentage point wiped out the dollar's yield advantage over the euro. The federal funds rate target is now at 3.5 per cent, while official euro zone interest rates are at 4 per cent.
The cut, which preceded next week's Federal Open Market Committee monetary policy meeting, was not enough to prevent US stocks from falling sharply when the market reopened after Monday's public holiday, however.
In New York morning trade, the euro was up 1.2 per cent on the day at $1.4622 after briefly racing to $1.4634. The euro has rebounded from a one-month low against the dollar of around $1.4366, according to Reuters.
Against the Swiss franc, the dollar was down 1 per cent to 1.0973 francs. The dollar was thumped against the high-yielding Australian and New Zealand dollars. It last traded down 0.9 per cent at US$0.8699 and dived 2.2 per cent at US$0.7635.