The dollar slid against most major currencies and fell below the Swiss franc Tuesday on promising economic reports around the world and the Bank of Japan's decision to provide markets with more liquidity.
The 16-nation euro bought $1.5096 in late trading in New York, up from $1.4993 late Monday. The dollar edged up to 86.65 Japanese yen from 86.29, while the British pound jumped to $1.6641 from $1.6424.
Meanwhile, the Swiss franc breached parity with the dollar after the European country's office for economic affairs said it emerged from a yearlong recession in the third quarter. The dollar has traded near parity after falling below the Swiss franc last week for only the second time ever. In late trading Tuesday, the dollar fell to 0.9990 francs compared with 1.0061 francs late Monday.
The ICE Futures U.S. dollar index, which measures the greenback against a basket of foreign currencies, fell 0.6 percent.
Reports on U.S. manufacturing and housing pointed to a rebound in the economy, while auto sales in November showed more signs of stability. Investors tend to sell the greenback in favor of riskier, higher-yielding currencies and stocks when strong economic reports or other developments imply the economy is improving.
"Such announcements provide fuel for the continuation of the risk rally," said foreign exchange strategist Jessica Hoversen of MF Global. "Overall the dollar negative momentum has not fully been challenged and the market moved forward to digest this week's heavy economic calendar."
Also Tuesday, official data showed that the number of unemployed in Germany, Europe's largest economy, unexpectedly fell in November while retail sales grew. Economists had expected an increase.
Investors took the data as a sign a recovery in Europe is on track.
U.K. manufacturers also reported a slight improvement in conditions in November though employment fell for the 19th consecutive month, an industry group said.
Meanwhile, in an emergency meeting, Japan's central bank decided Tuesday to further ease monetary policy by providing the economy with cheap loans amid government pressure to respond to a surging yen and falling consumer prices.
The Bank of Japan voted unanimously to offer about 10 trillion yen ($115.8 billion) in short-term loans to commercial banks to boost liquidity. It also maintained its key interest rate at 0.1 percent.
The yen has climbed sharply in recent days, and the central bank was under fire to take action. It vowed to do its "utmost" to battle deflation and bolster growth.
On Friday, the dollar briefly fell below 85 yen, its lowest level since July 1995 as debt problems afflicting Dubai shook up the banking sector. Investors are also still monitoring the Dubai situation.
"At the end of an emergency meeting, the BoJ said it will provide three-month loans to commercial banks at 0.1 percent interest rate. Eligible collateral will include Japanese government bonds, commercial paper and corporate bonds," UniCredit said in a morning research note.
Investors are also looking ahead to a European Central Bank meeting and Federal Reserve Chairman Ben Bernanke's reappointment hearings scheduled later this week.
The ECB should give some clues how it will end the extraordinary measures it used to supply the economy with extra liquidity during the financial crisis. The ECB is expected to keep its interest rate at 1 percent, a record low.
In other late trading, the dollar fell to 1.0438 Canadian dollars from 1.0570 late Monday.
Associated Press Writer George Frey in Frankfurt contributed to this report.