The euro hit a record low against the Swiss franc and the Australian dollar also fell today as weaker-than-expected Chinese data added to doubts about the strength of the global recovery.
The Chinese data sparked selling in higher-yielding currencies, with one trader saying low liquidity and short-term speculators taking punts on the euro against the Swiss franc and the Australian dollar against the yen added to the volatility.
China's purchasing managers' index (PMI) fell to 52.1 in June from 53.9 in May, weaker than the median forecast of 53.1.
The index was still above the threshold of 50 that separates expansion from contraction but the more modest rate of growth in the leading indicator stoked worries that a sharper slowdown is in store in the second half of this year.
The euro fell as low as 1.3073 Swiss francs on trading platform EBS, its weakest since the single European currency's launch in 1999.
The Australian dollar fell 0.4 per cent to $0.8367, after dropping to an intraday low of $0.8315.
The Aussie dollar later pared its losses after the Sydney Morning Herald newspaper reported that Australia's government and key mining companies are on the brink of a framework agreement on a mining tax compromise, quoting sources with knowledge of the talks.
An agreement would remove uncertainty in the market and any watering down of the tax proposal would be considered positive for investments and hence the Aussie dollar, traders say.
The yen edged higher, with the euro dipping 0.1 per cent to 108.09 yen. The euro fell as low as 107.50 yen earlier, nearing an 8-1/2-year trough of 107.30 yen hit earlier this week.
The dollar was down 0.1 per cent at 88.38 yen after striking a two-month low of 88.08 yen on EBS earlier. Traders cited talk of an option trigger near 88.00 yen, while the dollar's 2010 low lies at 87.95 yen.
The yen's latest rise has brought it to levels that could cause pain to Japanese exporters if its gains are sustained, with the Bank of Japan's tankan survey showing the average forecast for the dollar/yen rate in the year to next March among large manufacturers is 90.18 yen.
Market players say a fall in the dollar to levels below the 2010 low could open the way for a drop toward 85.00 yen, and put the focus on whether Japanese authorities may take steps to curb the yen's rise.
Last December the Bank of Japan called an emergency meeting soon after the dollar slid to a 14-year low of 84.82 yen in November, and decided to pump 10 trillion yen ($113.1 billion) in three-month funds into the banking system.
The euro slipped 0.1 per cent to $1.2211, giving back some of the previous day's advances.
It gained yesterday on news that euro zone banks borrowed less than expected from the European Central Bank (ECB). The ECB said 171 banks borrowed €131.9 billion over a three-month period, below expectations of €210 billion.
The amount is still the highest ever borrowed in a three-month period but pales beside the €442 billion of one-year money which banks must repay to the ECB today.
Spanish, Portuguese and Greek banks have been the biggest users of the facility. Gains in the euro were limited, however, after Moody's Investors Service said it may cut Spain's Aaa sovereign debt rating on deteriorating economic growth prospects.
The market focus now turns to the ECB's six-day tender later in the session. Expectations are for it to be subscribed to the tune of €75-125 billion. A lower-than-expected level of subscription could underpin the euro.
"In addition, Spain's five-year bond auction requires attention especially following the news on the possible downgrade in the country's rating," JP Morgan said in a morning note.
Reuters