The dollar hovered near a 9-year low on a trade-weighted index as investors waited to see if Friday's US jobs report would spell more trouble for the greenback or give it a reprieve. The dollar has come under fire in the last two days as the market has switched its attention away from the US election and back to the country's structural problems, particularly the US current account deficit.
"We are seeing a pause before the payrolls but generally I think people remain happy to play the trend and drive the dollar lower," said Paul Mackel, foreign exchange strategist at ABN Amro.
US jobs data at 1330 GMT will be closely watched for clues on the sustainability of the US recovery and the likely path of US interest rates.
Investors' worries about the US current account deficit have been aggravated by concerns over the US economy, which needs to attract a lot of foreign capital to plug the external shortfall.
The dollar traded at 84.52 against a basket of major currencies at 1240 GMT, having fallen on Thursday to 84.31, its lowest since 1995.
The dollar was little changed against the euro at $1.2860, having fallen close to $1.2900 on Thursday, its lowest since February and within striking distance of record lows hit the same month.
The dollar's recent decline has been broad-based with the US currency also hitting 12-year lows against the Canadian dollar and its weakest in over 8 years against the Swiss franc.
The dollar stood at 106.17 yen, having fallen below 105.70 on Thursday for the first time since April.
"The market is focusing on the need for a correction in the US current account deficit," said Adrian Schmidt, market strategist at Royal Bank of Scotland Financial Markets.
"After several months of range-bound trading investors are keen to jump onto a trend."
Analysts polled by Reuters expect data at 1330 GMT to show the US economy generated 169,000 new jobs in October, above the rise of 96,000 in September.
A below-consensus number could be the catalyst for the dollar to hit record lows against the euro, although a figure above 200,000 could ignite a short-covering rally, since short-dollar positions have built up to unusually high levels.
Investors are keen to gauge how tolerant other countries will be of a further slide in the dollar.
French President Jacques Chirac said on Friday he was concerned by the fall in the US currency, adding Europe would need to consider the repercussions on the region's growth and export prospects.
German Economy Minister Wolfgang Clement said European policymakers were monitoring the euro's recent rise and Group of Seven finance ministers would discuss currency issues if the move continued. However, he sounded relaxed about the euro's current levels, saying he expected Germany's economy to cope.
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