"People want to go into the weekend and the new year positioned for a weaker buck, which is the way that it has been pretty much since the election," said Tim Mazanec, director of foreign exchange with Investors Bank and Trust in Boston.
By early afternoon, the euro eased to $1.3638, after rising to a new high of $1.3667, according to Reuters data. An options barrier was broken at $1.3650, which triggered stop-loss orders above that level.
Against the Japanese yen, the dollar lost 0.6 percent compared with late prices in the prior New York session to 103.12 yen and was down 0.2 percent at 1.1316 Swiss francs.
Sterling was up 0.5 percent at $1.9264.
The euro also traded at a record high against the yen on Thursday, hitting 141.61 yen, according to Reuters data. But partly prompted by weaker-than-expected Chicago PMI data, it subsequently retreated over a full yen, in line with dollar/yen's slide, traders said.
The Chicago purchasing managers index fell to 61.2 in December from 65.2 in November, below economists' forecasts of a 63.0 reading.
The dollar had been trading slightly higher against some currencies before the data were released. But the decline in the headline number - and a weak employment component, which showed contraction in the labour market - was enough to push the dollar back down across the board.
"The headline was weaker than expected," said Todd Elmer, currency strategist at Barclays Capital in New York. "The dollar's reaction was consistent with what we've seen for the past couple of months. On a stronger number, we buy dollars and send it up about 30 or 40 pips. Then it gets sold off again. On a weaker number, traders just go straight at it."
As traders cleared off their desks ready to ring in the new year, the dollar was on track for a dismal fourth quarter. The US currency shed 10 percent against the euro and Swiss franc in the last three months.
Against the yen, the dollar fell around 7 percent in the quarter.
In the absence of any convincing signs of a substantial rebound in the greenback, traders added to their bets against the currency going into 2005.
"If anyone is out there looking for a correction in the dollar, it just hasn't happened and there's no sign that it's going to happen in the upcoming days," said Investors Bank and Trust's Mazanec.
Nevertheless some analysts see the euro holding relatively steady, and even slipping a bit, in the first quarter of 2005.
UBS, one of the largest participants in the currency market, predicts the euro will end the first quarter at $1.36.
"While the new year may see renewed appetite to rebuild dollar short positions, we expect notable early February event risk to keep dollar downside in check," the bank said in a research note to clients.