The dollar dropped to a record low versus the euro on Tuesday after the Federal Reserve cut its benchmark rate by half a percentage point, its first cut in four years.

Amid concern that the economy could be constrained by tightening credit conditions, members of the U.S. Federal Reserve meeting on Tuesday decided to cut the Fed funds rate by 50 basis points to 4.75 percent.

Traders lowered the selling price of the dollar as the rate cut made dollar-denominated assets less desirable.

The move to cut the rate at which banks make overnight loans to each other was considered by some to be a surprise with many expecting a drop of 25 basis points.

The dollar fell to $1.3971 per euro at 4:10 pm in New York, after earlier reaching an all time low of $1.3981. The previous low was $1.3927 on September 13.

The yen fell to 116.16 per dollar and 162.29 per euro. The dollar also dropped against the Canadian dollar to trade at 1.0136.