The dollar hit a three-year low against a basket of currencies on Thursday as strong corporate earnings buoyed risk appetite in illiquid pre-Easter trade, threatening to drive the greenback to historic lows.
Ongoing expectations the Federal Reserve will keep U.S. interest rates low battered the dollar to a 16-month low against the euro around $1.4650, while traders said M&A-related demand also pushed the single currency higher.
Analysts said the euro looked on course for a move toward $1.50 if the current momentum continues despite the lingering possibility of a Greek debt restructuring, which would exacerbate fiscal problems facing weak euro zone countries.
At the same time, this week's threat by Standard & Poor's to cut the United States' prized triple-A credit rating has knocked dollar sentiment, reminding the market that the U.S. still has massive debt problems.
In the ugly dog currency competition the dollar is looking like the really ugly dog. The euro zone at least looks to be doing something about their debt problems, said a London-based head of FX sales.
The chart outlook for the greenback looked dire after it tumbled through a 74.17 trough hit in November 2009, a move that may spark a run toward the 70.698 all-time low hit in 2008.
The Australian dollar soared to a 29-year high while the Canadian currency pushed up to its strongest since late 2007, though traders warned the moves could reverse as investors take profit on short dollar positions before the long Easter weekend.
Signs of profit taking abounded in the European session, with the Aussie stumbling ahead of options barriers at $1.0800 after surging as high as $1.0775.
The euro was up 0.6 percent at $1.4605, with traders citing bids from eastern European accounts above $1.46. Stops were tripped on the way up after breaching an option barrier at $1.4550 and the January 2010 high at $1.4583.
The dollar index <.DXY> was at 73.874, having slipped to 73.735, the lowest since August 2008 -- just before it surged during the Lehman Brothers collapse -- as world stocks <.MIWD00000PUS> marched higher.
Strong earnings reports from a lot of companies have driven risk appetite and we have seen huge moves in all dollar crosses, but it would be surprising if we didn't see some profit taking, said Richard Falkenhall, SEB currency strategist in Stockholm.
Broad dollar weakness pushed the Swiss franc to an all-time high, while gold prices also hit their strongest ever.
The euro looked poised for further gains, with the path clearing for a run at the 2009 peak at $1.5145.
It has vaulted from $1.4155 hit on Monday, and analysts said that few in the market were brave enough to counter insatiable euro demand from Asian sovereigns, which have been seen swooping in to buy the currency whenever it sells off.
People who have tried to sell euros so many times, they've lost money trying to do so, said Adam Myers, senior currency strategist at Credit Agricole CIB.
We're going to see them either stick to the sidelines from now on, or next time we get an aggressive sell-off in euro/dollar, they'll come in an buy on dips along with Asian investor, he said adding that a climb to $1.50 in the next month was possible.
Market participants say central banks have recycling dollar proceeds into the euro, Aussie and other currencies.
Asian authorities have increasingly had to intervene to buy dollars to limit the gains in their currencies and then shift them into other currencies and assets.
This has helped the euro to brush off ongoing worries about the euro zone crisis, underscored this week by speculation that Greece may have to restructure its debt.
A German sentiment survey on Thursday was below forecast but still suggested Europe's powerhouse is holding up well.
The dollar lost 0.6 percent against the yen to 81.95 yen, breaking support with a fall below 82.00 -- the intraday high reached on March 18 when the G7 intervened to sell the yen.
Trading activity may start to slow before the Easter holidays, with European markets shut on Friday and Monday.
(Additional reporting by Naomi Tajitsu; Editing by Toby Chopra)