But Asian traders pushed it back up about half a cent from the record low of $1.3667 per euro.
"The story about the weak dollar has not gone away," said Wong Keng Siong, an economist with the Bank of Tokyo-Mitsubishi in Singapore.
"But the euro's movements have been sharp, amplified by the holidays, and it is quite difficult to gauge how people who come back next week from their holidays will react," he said.
Japanese markets were closed on Friday, further thinning liquidity during the holiday season.
Analysts said the euro's retreat would be fleeting, and concern about the bulging US current account and budget deficits remained the key factor driving major currencies.
The euro was $1.3619/22 compared with $1.3647 late in New York, Reuters data shows. The euro looks set to end 2004 more than 8 percent higher than a year earlier against the dollar.
The Chicago purchasing managers' index fell to 61.2 in December from 65.2 in November, below market expectations for a 63.0 reading.
This indicated manufacturing activity was still expanding, but at a slower pace.
However, the real concern for the economic outlook was the index's employment component, which dropped to 49.1 from 60.8, sending the dollar and US Treasury yields lower.
The Japanese yen rallied, clawing back ground against the euro having traded cautiously on fear of official intervention to curb the currency's strength in the face of the wilting dollar.
John Cairns, head of research at IDEAglobal.com in Singapore, said markets had pushed the yen higher thinking the risk of intervention was lower during the year-end holidays.
But, Japanese Finance Minister Sadakazu Tanigaki has said the authorities would keep a watch over markets during this lean period. "Japanese authorities probably in principle accept that the US dollar is likely to structurally weaken over time due to US external imbalances.
The dollar was 102.55/60 yen compared with 102.96 at the New York close. The yen is trading around 4 percent higher than a year earlier.
The euro/yen cross rate was 139.60/70 compared with 140.52 in New York and about 2 yen off Thursday's record high.