The ailing dollar staggered to a new four-year low on the euro and set a one-month low versus the yen today.
The dollar slid within a whisker of $1.12 to the euro and below 118.50 yen in early trade after a dismal regional US manufacturing report yesterday raised worries that the key ISM survey later in the day would also be disappointing.
The dollar has shed six cents against the euro in the past four weeks, with many analysts blaming a shift out of low-yielding US bonds into higher-yielding euro-denominated assets and a flurry of weak economic data from the United States.
Doubts over the relative appeal of US assets were also fuelled by Federal Reserve chief Mr Alan Greenspan who reported to Congress yesterday.
Mr Greenspan said the US economy seemed poised for a rebound with the end of the Iraq war. But he cautioned on business confidence, warning further substantial disinflation would be an unwelcome development and repeated there was clearly room to cut interest rates again if needed.
A further fall in US rates is likely to be damaging for the dollar in a market where investors reward currencies with higher yields. It could also raise dollar selling pressure since lower interest rates cheapen the cost of hedging.
