The dollar hit a three-year low against the yen and a four-month low versus the euro today as investors bet the US and European authorities would let it fall to correct the ballooning US current account deficit.
Japanese officials stepped up their warnings about rapid currency moves but suspected dollar-buying intervention by the Bank of Japan did little to stop the dollar sliding for a fourth consecutive day.
The US currency, which has shed more than 5 per cent against the yen since mid-September, stumbled below 109 yen before paring losses as talk of Japanese intervention swirled through trading floors.
Some analysts speculated that Japan, which threw more than 13 trillion yen at the foreign exchanges in the first nine months of the year, was now more concerned with slowing the yen's rise rather than halting it.
The euro extended gains to $1.1860, less than a cent away from record highs scaled in May and June before a bout of profit-taking pushed it back to session opening levels around $1.1820.
Figures showing a surprise fall in German unemployment fuelled optimism that recent labour market reforms were having an effect, but analysts said data out of the euro zone was having little impact on the foreign exchanges.