The dollar slid to a new all-time low Tuesday against the euro, which rose to $1.3643 in thin post-holiday trading.
The dollar's new low came in afternoon European trading, with the euro creeping just past its previous high -- set Monday -- of $1.3640.
The dollar has fallen steadily against the euro and other major currencies in recent weeks on worries over the large U.S. trade and budget deficits. With no short-term fix for those deficits in sight, many analysts expect the dollar to continue weakening and some have predicted a euro level of $1.40 or higher by the end of 2005.
The U.S. currency has hit a series of new lows against the euro since Thursday in very light trading around the Christmas holiday. Low trading volumes can make exchange rates more volatile.
In Tokyo late Tuesday, the dollar bought 103.06 Japanese yen, down 0.68 yen from its level late Monday and below the 103.10 yen it bought in New York later that day. The dollar fetched 103.01 yen in European trading.
Though Washington professes a "strong dollar" policy, most observers believe the U.S. administration is content to see the dollar fall because it makes American exports cheaper and can help export-dependent sectors of the economy.
European officials fear the stronger euro could hurt their region's economy by making exports more expensive. On the other hand, it helps cool inflation by making imports -- particularly oil, which is priced in dollars -- cheaper.
Other consequences include higher costs of living for Americans abroad.