The euro continued its fall from a 4-month high reached on Monday, as debt concerns resurfaced following Moody’s downgrade of Spain debt on Thursday.

Against the dollar, the single currency fell to 1.3802 from 1.3940 level on Wednesday. On Monday, the euro reached $1.4014 amid speculations over the interest rate hike by the European Central Bank (ECB).

Moody’s downgraded Spain’s debt by one notch to Aa2, citing concerns over the cost of restructuring of the country’s banking sector and also the government’s ability to reach its borrowing reduction targets. Also, the rating agency on Monday downgraded Greece’s sovereign debt by three notches from Ba1 to B1 with a negative outlook.

Also, investors remained focused on the upcoming European Union’s summit on Friday, where leaders are expected to come out with a comprehensive plan to tackle the debt crisis.

However, as the euro slipped, the US dollar strengthened against a basket of currencies owing to the risk aversion in the market. The dollar extended gains for the fourth straight day against the Japanese Yen. On Thursday, the pair scored an impressive figure of 82.94 from 81.60 traded on Wednesday.

Sterling dropped against the dollar to 1.6156 from 1.6241 on Wednesday, as investors await the interest rate decision by the Bank of England at 12.00 GMT on Thursday. Investors expect the rate to remain unchanged at 0.5percent.

The Australian dollar fell against the greenback on Thursday as the number of employed people unexpectedly fell in February though the unemployment rate was unchanged at 5 percent. Aussie slipped to two-week low at 1.0033 dollars from 1.0131 traded on Wednesday. Kiwi also dropped sharply to 0.7349 against the dollar following a cut in interest rates by 50 bp by the Reserve Bank of New Zealand. The markets had expected the central bank to cut the rates by 25 bp.