The dollar hit an all-time low against the euro on Wednesday, shrugging off US economic data as concerns about possible attacks in the United States during New Year celebrations intensified selling pressure.
A weekly jobless claims report showed new applications for US state jobless benefits hit the lowest level in nearly three years.
But the seemingly upbeat report of 339,000 new claims last week failed to support the greenback.
Currency traders are "routinely ignoring positive information, choosing instead to highlight negative information as an excuse to sell the dollar," said Michael Woolfolk, senior currency strategist with the Bank of New York. He noted that the greenback's downward momentum was accentuated by thin markets.
The dollar's performance in recent months has become effectively divorced from that of fairly robust US economic reports because the widening US current account deficit - the broadest measure of the nation's global trade - and low US interest rates have punished the greenback.
In addition, Tuesday's US consumer confidence, manufacturing and home sales figures fell short of expectations, though they still pointed to recovery in the world's largest economy.
As 2003 drew to a close, the US government ordered warplanes to patrol skies over New York, Las Vegas and other US cities during New Year's Eve celebrations as part of increased vigilance against attacks.
Earlier this month, the US terror alert status was raised to the second-highest level due to heightened fear of attack, darkening dollar sentiment that was already bleak.
The dollar fell to record lows around $1.2647 per euro, according to Reuters data, bringing its losses this year to more than 17 percent.
It also hit its lowest level in six years against the Australian dollar and New Zealand dollar and hit a 10-year low versus the Canadian dollar below C$1.2900.
Against the yen, the dollar hovered just above recent three-year lows.
In early New York trading, the euro was up 0.6 percent on the day to $1.2620. Against the yen, the dollar was virtually flat at 107.01 yen.
Against the Swiss franc, the dollar was at 1.2336 francs, down 0.7 percent on the day. The pound rose 0.9 percent to $1.7923.
The dollar's weakness is likely to draw market attention to February's Florida meeting of finance ministers from the Group of Seven (G7) industrialised nations as investors speculate how it will react to the recent dollar fall.
"Everybody is looking to the February meeting: that seems to be the next major sticking point (for the dollar)" said Tim Mazanec, senior currency strategist with Investors Bank & Trust in Boston.
"At this point in time I would believe that if there was anything (by way of currency market intervention to support the dollar), the Europeans might come in by themselves," Mazanec added.
On Tuesday, a G7 source told Reuters the group would look at the weakened dollar during the February 6 meeting.
Ahead of the G7 talks, there is a bi-monthly meeting among central bankers at the Bank for International Settlements in Basel on January 12.
The G7 source also said European nations were becoming increasingly concerned about the dollar's fall, adding that a level of $1.30 per euro represented a "pain barrier."