The dollar fell half a per cent on the euro today on worries ahead of US trade data due later in the day and renewed worries over US deficits and unrest in Iraq.
The vast US trade deficit is expected to show a rise in September, putting further stress on the United States's need to attract investment to plug the gap, and traders said this was one reason investors unwound long dollar positions built up in the past two weeks.
Economists forecast a median $40.5 billion deficit in September compared with a $39.21 billion deficit in August.
This is the third straight day of dollar selling, fed by a host of other arguments as well, which were damaging investors' appetite for the greenback.
By 12.40 p.m., the dollar was 0.4 per cent down at $1.1686 per euro, its lowest since the end of October, and 0.5 per cent down against the yen at 108.23, less than a yen above a recent three-year low. Gold, another traditional safe-haven, is trading around 7-1/2 year highs.
Fresh attacks on US soldiers in Iraq have underlined Washington's struggles there, with at least 156 U.S. soldiers killed in action in the past six months.
A CIA report concluded ordinary Iraqis were increasingly supporting the attacks, casting doubts on Washington's ability to stamp out attacks and drum up support from other countries to police Iraq.
Problems in Iraq highlighted concerns in investors' minds about the gaping US trade and current account deficits, because of the costs involved in the war and potential pressure on capital investment flows into the dollar.
The euro zone was showing signs of economic improvement, with its largest economy returning to growth in the third quarter. Germany pulled out of its second recession in two years, expanding by 0.2 per cent.
France, which narrowly escaped a first-half recession that had ensnared Germany and Italy, grew 0.4 per cent in July- September.