Commodity-linked currencies, led by the New Zealand dollar, fell on reports that some Chinese banks have been instructed to curb lending - a move that some in the market said may slow China's economic recovery and cut its demand for commodities.
The single currency broke well below its 200-day moving average versus the dollar around $1.4295, which had been considered a key support level. Selling accelerated after stop-loss orders were triggered under that level, traders said. The last time the euro broke below that moving average was in August 2008, when it tumbled more than 10 cents within a month. Analysts said Tuesday's Massachusetts election may pave the way for legislative compromises and ultimately spending cuts.
Paul Mackel, director of currency strategy at HSBC in London, said this view contrasted with the picture in the euro zone, where Greece's ballooning debts have raised concerns about the fiscal health of some members of the 16-country bloc. The euro fell as low as 86.88 pence against sterling, its weakest since late August. By 1254 GMT, the euro traded 1.1 percent lower at $1.4140, having hit a low of $1.4132, a five-month low. The euro has fallen around 1 percent against the dollar so far this week, and some in the market said the pace of its losses may slow in the near term.
Concerns about Greece's ability to deal with its budget deficit again weighed on the euro, with the premium investors demand to hold Greek government bonds over German bonds hitting an 11-month high on Wednesday. Broad dollar gains helped push its value against a currency basket to 78.111, its strongest in a month.
The yen also rose broadly, helped by rising risk aversion as equities and commodities fell, with the euro hitting a one-month low 128.53 yen. The New Zealand dollar tumbled 2.5 percent versus the US dollar to a three-week low $0.7201 after data showing easing inflation pressures cooled speculation the central bank may soon raise interest rates. Weaker-than-forecast Canadian inflation data knocked the Canadian dollar to a two-week low of C$1.0449 per US dollar while the Australian dollar fell 1.2 percent against its US counterpart and the yen.