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The bottom fell out against the slumping euro against the dollar on Thursday, leaving the single currency at its worst levels since last May due to rising concerns about sovereign debt in Greece, Spain, and now, Italy.
Portugal tried to borrow 500 million euro from investors last night, but failed to do so.
Comments from European Central Bank President Jean-Claude Trichet failed to inspire confidence that euro area economy is on the mend.
The recovery process in the Eurozone economy is likely to be uneven, Trichet said Thursday, after the central bank retained key interest rate at a record low of 1%.
Trichet said this outlook remains subject to uncertainty. The outcome of the monetary analysis confirms the assessment of low inflationary pressure over the medium term, he added, fueling speculation the policy makers will keep rates low for an extended period.
Even with US jobs data signaling continued weakness in the employment market, the euro was battered against the greenback, hitting an 8-month low of 1.3755. With the loss, the euro moved further from November's 15-month peak above 1.5100.
First time claims for unemployment benefits in the US unexpectedly showed a modest increase in the week ended January 30th, according to a report released by the Labor Department on Thursday, with the data likely to raise some concerns about the upcoming monthly employment report.
Meanwhile, the euro tumbled to its lowest in nearly a year versus the broadly stronger yen, hitting 121.60.
Versus the sterling, the euro held its ground near .8725 after the Bank of England halted its GBP 200 billion bond purchase programme and retained its key interest rate.
Policy makers assured these measures would continue to impart a substantial monetary stimulus to the sluggish UK economy for some time to come.
The euro enjoyed strong gains against commodity-backed currencies as oil and metal prices plunged. The euro rose to a monthly high of 1.5950 against the aussie.
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