The euro set fresh record highs versus the dollar on Friday, but the $1.50 level proved out of reach for now as the euro was knocked more than a cent off its peak by comments from a euro zone policymaker.
Moves in currencies were amplified by thin liquidity in the wake of the Thanksgiving holiday in the United States on Thursday and with Japanese markets closed for a holiday on Friday.
ECB Governing Council member Miguel Angel Fernandez Ordonez said he saw a stronger than expected slowdown in the euro zone and that there was not enough data to dispel uncertainty about the effects of financial market turmoil.
Ordonez' comments reminded investors that the fallout from the credit crisis is not limited to the United States, where they have prompted 75 basis points worth of cuts in the fed funds rate since September and helped send the dollar to record lows.
The comments re-emphasize that while the market has been preoccupied with U.S. economic weakness the U.S. is not alone in suffering and the euro zone will struggle or at least decelerate next year as well, said Jeremy Stretch, market strategist at Rabobank.
The comments gave some respite to the dollar, which slid to new record lows versus the euro, the Swiss franc and a basket of major currencies earlier on Friday as investors raised their bets that the Federal Reserve will cut rates by at least another 25 basis points next month.
By 0926 GMT the euro was at $1.4820, down 0.2 percent on the day and well below the peak of $1.4966 set earlier in the session, according to Reuters data.
The euro showed little reaction to euro zone data showing faster than expected growth in the manufacturing sector but a sharper slowdown in services industry growth in November.
The Ordonez comments cheered stock markets, which like the idea of rate cuts as that reduces the cost of companies' debt and also makes equities a more attractive investment relative to government bonds.
The rise in equities -- fuelled also by talk of merger and acquisition activity -- together with the sell off in euro/dollar helped drag the dollar up from 2-1/2 year troughs versus the yen.
At 108.15 yen though the dollar is down more than 6 percent since the start of November and on track for its biggest monthly percentage fall versus the yen since early 2000.
The yen and the Swiss franc have both benefited in recent sessions as investors, worried about the fallout from credit market problems and the impact on the broader economy, remained averse to risk.
Worries about the fallout have been stoked by the Organisation for Economic Co-operation and Development, which warned in a report on Wednesday that overall losses caused by the U.S. mortgage market crisis could conceivably hit $300 billion.
The market is very thin... (and) very nervous, said Mansoor Mohi-uddin, chief currency strategist at UBS in Zurich.
The dollar fell to a historic low of 1.0899 Swiss francs, before trimming losses a little to stand at 1.0969.
(Additional reporting by Simon Falush)