The dollar sank to a record low against the euro, falling sharply across the board on Wednesday, after a slew of weak data fueled doubts about a robust U.S. economic recovery in the fourth quarter.
U.S. sales of new single-family homes fell 2.4 percent in November to 1.08 million houses, defying market expectations of an increase to 1.12 million.
"New home sales were weaker than expected and as we saw earlier this morning, the market is not passing up any opportunity to sell the dollar, although the number was not significantly below expectations," said Michael Woolfolk, senior currency strategist with the Bank of New York.
Thinning market conditions ahead of the Christmas holiday contributed to the dollar's slip to new lows, analysts said.
Late morning in New York, the euro rose to a fresh record high around $1.2470, before trading back down to $1.2465, up around 0.6 percent on the day and within sight of the psychologically important $1.2500 mark.
Against the yen, the dollar was down 0.1 percent to 107.21 yen, as traders became apprehensive about possible Japanese intervention to weaken the yen given the market's low liquidity ahead of the Christmas holidays.
Against the Swiss franc, the dollar fell over 1 percent to 1.2455 francs. The pound, meanwhile, climbed 0.7 percent to $1.7756. U.K. markets close early on Wednesday and are shut until Monday.
Bevy of weak U.S. data
The dollar earlier fell after new U.S. orders for durable goods fell 3.1 percent, way below market expectations for a rise of 0.8 percent.
"The November durable goods surprised on the downside significantly. This provides some evidence that the robust pace of growth we saw in the third quarter is going to cool down in the fourth," said Alex Beuzelin, foreign exchange market analyst at Ruesch International in Washington DC.
"Unfortunately for the dollar, it will still be saddled with negative interest rate differential and should see further pressure going forward," he added.
Initial claims for U.S. jobless benefits fell to 353,000 in the week ending Dec. 20, hitting the market's consensus number.
Mad cow bites
News of the first U.S. case of mad cow disease, which devastated parts of European agriculture in the 1990s, also exerted some pressure on the dollar. But analysts deferred judgment until the full extent of the problem is determined.
The discovery of the disease in Washington state prompted Japan, a top importer of U.S. beef, and a host of other countries to halt imports of U.S. beef.
"Any impact might be dampened by the illiquid markets we're seeing today. It might be a story into the new year with the issue of whether it spreads," said Paul Robson, international economist at Bank One in London.
The Australian dollar was among the biggest movers, up 0.8 percent at US$0.7425, rebounding versus the yen and Swiss franc as well on the back of its yield advantage and a view that Australian beef exports will benefit from bans on importing U.S. beef.
Analysts said investors were also edgy about the possibility of attacks on U.S. soil over the holidays after Washington raised its security alert to the second-highest level last the weekend.