The safe-haven dollar slid to a 15-month low against the euro, was within striking distance of 14-year lows versus the yen and dipped below parity against the Swiss franc Wednesday as markets absorbed the Federal Reserve's indication that interest rates will remain at super-low levels for a while and it was not overly concerned by the U.S. currency's decline.
Against a basket of six currencies including the euro, yen and franc, the dollar fell as low as 74.245, its weakest point since August 2008 and its steepest one-day drop since July 31, said Joseph Trevisani, chief market analyst at FXSolutions.
The 16-nation euro climbed as high as $1.5142 Wednesday, its strongest level since August 2008. In late New York trading, it read $1.5139 from $1.4975 late Tuesday.
The break above $1.51 sets the dollar up for possible steep drops this weekend.
Stuart Bennett, senior foreign exchange strategist at Calyon Credit Agricole, said there's now a chance that the euro's breakthrough opens the way for a "rapid" move higher, especially if stocks remain well-bid _ for much of the past year, the dollar has moved in opposite direction to stocks.
"The market is completely onboard for this," said Trevisani. The jump above $1.51 ahead of the thin trading of the Thanksgiving weekend set the dollar up for some big potential losses, he said.
The dollar also fell to 87.40 Japanese yen from 88.56 yen, after earlier falling to 87.19 yen, its weakest level since January and close to 14-year lows.
Meanwhile, the dollar fell to 99.66 Swiss francs from 1.0082 francs, dropping below parity for only the second time ever.
It dropped below 1 franc for the first time on March 14, 2008.
The renewed slump in the dollar was driven largely by the publication Tuesday of the minutes to the Fed's last rate-setting meeting on Nov. 3-4.
The Fed said at the time that it plans to keep interest rates at "exceptionally low levels" for an "extended period" _ currently the Fed funds rate stands at a range between zero and 0.25 percent _ and that the fall in the dollar had been "orderly."
Currency traders seized on the reference to the dollar as the Fed is usually wary of talking about changes in currency values.
Traditional interest rate differences are likely to underpin further dollar losses, analysts say. The U.S. interest rate is among the lowest in the world.
"Risk remains the key driver for foreign exchange markets, but rate differentials are becoming more relevant," said Bennett.
What happens toward the end of the year isn't necessarily indicative of how traders will view the dollar next year, however, as banks wind down trades and investors book profits. And in thin holiday trading, that means steep swings can easily occur in either direction.
"December could end up being quite wild on a day to day basis," said David Watt, senior currency strategist at RBC Capital in Toronto. The dollar could jump "from one polar extreme to the other."
Also on Wednesday, some economic reports pointed to a recovery in the U.S., helping send stocks higher and the dollar lower. The Standard & Poor's 500 was up 0.4 in afternoon trading.
The safe-haven dollar tends to trade inversely to more risky equities, as well as commodities and emerging-market currencies whose countries have maintained higher interest rates.
On Wednesday, the Labor Department reported a drop in unemployment claims to the lowest level of the year last week. The Commerce Department, meanwhile, said sales of new homes rose last month to the highest level in more than a year, and consumer spending rose a brisk 0.7 percent last month _ after a 0.6 percent drop in September.
Orders for expensive manufactured goods, however, dropped for the first time since August.
In other trading, the dollar fell to 1.0457 Canadian dollars from 1.0577, while the Australian dollar jumped to 93.18 U.S. cents from 92.04 U.S. cents and the New Zealand dollar gained to 73.09 U.S. cents from 72.60 U.S. cents.
The greenback also notched big drops against Scandinavian currencies and the Hungarian forint.
Pylas reported from London. Arbel and Erin Conroy in New York contributed to this report.