The dollar's decline deepened after a report showed slowing U.S. growth, a day after Federal Reserve Chairman Ben Bernanke signaled the key U.S. interest rate will stay low for some time.
The euro coursed above $1.48 for the first time since December 2009. The dollar slid versus the British pound and Japanese yen. Currencies of countries that are big commodity exporters, such as the Australian dollar and Canadian dollar, climbed. A measure of the dollar's value against a group of six major currencies fell to the lowest level since July 2008.
"For the time being, we're in a weak-dollar world," said David Gilmore of research firm Foreign Exchange Analytics in Essex, Conn.
And the declining dollar will hit U.S. consumers' pocketbooks. Gas is getting more expensive, and rising costs for raw materials are driving companies to raise prices on their goods.
"We're going to pay more for everything we buy, and not going to want to travel out of the country as much," Gilmore said.
The government said Thursday the economy grew at a 1.8 percent annual rate in the first three months of the year, down from 3.1 percent growth for October-December 2010, underscoring concerns about the strength of the U.S. recovery. During January, February and March, rising gas prices hit consumer spending, bad weather delayed construction work and the government made huge cuts in defense spending.
A separate government out Thursday said more people requested unemployment benefits last week. Applications for jobless aid rose 25,000 to a seasonally adjusted 429,000, the highest total since late January.
"The economy has lost its modest upward momentum," said BMO Capital Markets economist Sal Guatieri in a research note. Government budget cuts and rising gas prices are likely to subdue the recovery in the months to come, he added, and the slowdown "reinforces the view that rates are on hold for some time."
Bernanke had said Wednesday that rising commodity prices will likely have only a temporary effect on broader inflation in the U.S. Central banks raise interest rates to contain inflation, and policymakers overseas are already increasing interest rates to counter rising oil and food prices. But the modest recovery from the recession in the U.S., particularly evident in high unemployment and a troubled housing market, has prompted U.S. policymakers to keep interest rates near zero.
Expectations that the Fed wants rates to stay low to help support the economy make the dollar less appealing to investors than currencies from countries where rates are already higher and expected to rise further.
The declining dollar can hurt U.S. consumers, because how much one dollar can buy is shrinking. A weaker currency should help U.S. companies sell their goods abroad, but it also tends to make imports more expensive for U.S. buyers: German cars, Australian wines, Swiss watches.
Commodities are also priced in dollars, which makes them more attractive to buyers with foreign currency as the dollar falls. As the cost of raw materials soars, consumer products makers are raising prices on their goods, passing higher costs on to consumers.
On Thursday, for example, Procter & Gamble Co. said it was raising prices to offset the climbing cost of goods. The world's largest consumer products maker will raise prices on shampoo, pet food and dishwasher detergent. In the past three months, it has increased prices of razors, batteries, diapers, paper towels and toilet paper.
The euro rose to $1.4821 late Thursday from $1.4740 late Wednesday. It peaked at $1.4881 Thursday, its highest point in nearly 17 months. The British pound rose to $1.6643 from $1.6577, while the dollar fell to 81.57 Japanese yen from 82.24 yen.
The Australian dollar careened to its highest level against the dollar since it began freely trading in December 1983, and the U.S. currency fell to 95.12 Canadian cents from 95.21 Canadian cents. The dollar has been declining steadily against currencies of countries that are big exporters of raw materials _ like Australia and Canada _ during this year's boom in commodity prices.
The dollar also fell to 0.8732 Swiss franc from 0.8767 Swiss franc.