The dramatic moves followed weak US data and comments from the Federal Reserve which reinforced expectations of further aggressive US rate cuts.
The dollar index, a measure of the US unit’s strength against a basket of currencies, fell to a record low of 74.264.
Tumbling US house prices and weak consumer confidence overshadowed rising producer price inflation on Tuesday. Later, the Federal Reserve’s Don Kohn said slowing growth was a greater risk than rising inflation.
He indicated that price pressures were moving up the Fed’s list of concerns but added: I expect the run-up in headline inflation to be reversed and core inflation to edge lower over the next few years.”
Alan Ruskin, currency strategist at RBS Greenwich Capital, said: ”Ugly US data has kept up momentum for the Federal Reserve to ease rates, while the Fed shows it is still willing to oblige, regardless of the state of inflation.”
The euro was further buoyed by comments from Axel Weber, a member of the European Central Bank’s governing council who said that anyone looking for rate cuts from the ECB were underestimating inflation risks.
The moves in currency markets encouraged buyers of commodities as the weak dollar made investment in assets priced in the US currency cheaper.
Oil prices also hit records. Nymex West Texas intermediate soared to $102.08, before edging back to $101.25. Brent crude rose to $100.53 as investors hedged against the weaker dollar.
Gold, which is often used as a hedge against inflation when oil prices rise, hit a fresh peak of $964.70 a troy ounce, and helped lift other precious metals. Silver rose to $19.43 its highest level since November 1980.