The dollar fell to fresh lifetime lows versus the euro and a basket of currencies on Friday as investors fretted an anticipated Federal Reserve interest rate cut next week would not be the last.
U.S. crude oil's surge to record highs above $92 a barrel and gold's jump to 28-year peaks also hurt the dollar, boosting commodity currencies such as the Australian dollar which hit a 23-year high against the greenback.
The fact that the 25 basis points is already priced into the market is going to be a double negative for the dollar because it will be a loss of the interest rate foundation and it's going to suggest further cuts, said Ashraf Laidi, chief currency strategist at CMC Markets in New York.
Against the backdrop of weak economic data and hefty losses by the country's big financial institutions, U.S. interest rate futures are fully reflecting a 25 basis points cut in the fed funds rate target to 4.50 percent next Wednesday, while the odds for a half a point reduction are around 55 percent.
The U.S. central bank outlook is for a 50 basis point cut by the end of the year, said Brian Taylor, senior currency trader at M&T Bank in Buffalo, New York. Even if they only do 25 basis points here (in October), the feeling is they will do another 25 basis point cut in December.
In early afternoon New York trade, the euro was trading up 0.5 percent at $1.4388, after racing to a record high of $1.4393, according to Reuters data.
The dollar index, which measures the greenback's value against a basket of six major currencies, dropped as low as 76.977, the lowest since its post-Bretton Woods inception over 30 years ago.
It was last trading 0.3 percent down at 77.019.
Remarks by Eurogroup Chairman Jean-Claude Juncker in a newspaper interview published on Friday that the European currency had not yet reached levels that might cause alarm also contributed to the negative tone against the dollar, analysts said.
Data showing euro zone money supply annual growth for September came in at 11.3 percent, a slightly slower rate of growth than for August but still well over the ECB's 4.5 percent target, added to the euro's strength.
There is no compelling reason to buy the U.S. dollar, said Firas Askari, head currency trader at BMO Capital markets in Toronto.
The Aussie climbed as high as US$0.9171, while the New Zealand dollar scaled a session high of US$0.7674.
The Canadian dollar hit a fresh 33-year high against the greenback. The dollar was last trading 0.4 percent lower at C$0.9630.
The rise in high-yielding commodity currencies, coupled with gains in equity markets, helped boost risk appetite and encourage investors to put on carry trade bets funded by cheap borrowing in the Japanese yen.
The dollar was little changed against the yen at 114.13 yen, while the euro gained 0.4 percent to 164.25 yen. Sterling hit a three-month high versus the dollar at 2.0574, but fell against the euro as investors bet Britain would be next to start cutting rates.