The dollar slipped across the board on Tuesday as markets waited nervously for an expected interest rate hike by the US central bank and its signals on the future pace of monetary tightening later in the day.
Markets are convinced the Federal Reserve will raise borrowing costs a quarter point for the third time this year, despite recent evidence of a soft patch in the US recovery which has raised doubts over whether future rate rises will be as steep as initially thought.
The Fed will announce its verdict at 1815 GMT.
"A rate hike is fully priced in, so it's all on the statement," said Lee Ferridge, head of global currency strategy at Rabobank in London.
"There are some last-minute nerves the Fed will sound more circumspect on the economy than before and this appears to have triggered some dollar selling."
Higher interest rates tend to benefit a currency by making returns on deposits more attractive to global investors. Historically low interest rates of just 1 percent were a key factor behind the dollar's fall to record lows against the euro earlier this year.
A quarter point rise would take rates to 1.75 percent.
By 1154 GMT, the dollar was down 0.6 percent against the euro at $1.2252, having earlier hit a one-week low at $1.2263. It was down 0.8 percent against the Swiss franc at 1.2609. The dollar's losses against the yen were more modest at 109.74, down just 0.1 percent on the day.
The euro showed little reaction to data showing investments flowed out of the eurozone in July while the current account surplus narrowed.
Data from the European Central Bank showed the current account surplus in the 12-nation bloc narrowed to 3.1 billion euros in July from an upwardly-revised 5.4 billion in June as portfolio investment registered a net outflow of 30.5 billion euros.
Dealers said the numbers were interesting from a longer-term perspective but were having little impact in a market more concerned with the United States' record current account deficit.
"This data does little to dispel the idea that there is little appetite for eurozone assets at the moment," said Ian Gunner, head of foreign exchange research at Mellon Bank in London.
"However, the main focus in euro/dollar is on the US side of things, so it needs something sensational on the eurozone side to move the market."
The euro seemed to find some support, however, from a report by the Organisation for Economic Co-operation and Development, which raised growth forecasts for the eurozone and cut them for the United States.
The OECD raised its eurozone growth forecast for this year to 2 percent from 1.6 percent and cut its US growth forecast to 4.3 percent from 4.7 percent.
Oil prices held firm above $46 a barrel on Tuesday as China showed no let-up in its strong import growth and US Gulf producers reported damage to offshore rigs from Hurricane Ivan.