The euro skidded lower against the dollar on Friday fears of a recession in the single currency area after Italy reported a contraction in the second quarter, dealers said.
The euro fell to 1.5049 dollars in late European trade, down sharply from its level of 1.5321 dollars in New York late on Thursday.
The dollar stood at 110.51 yen from 109.46 yen on Thursday.
The Italian economy contracted in the second quarter, official data showed on Friday, adding to a deepening sense of gloom about the eurozone economy amid a flurry of bad news for the 15-nation bloc.
Italy is the first eurozone country to reveal figures for the second quarter and a 0.3-percent quarter-on-quarter contraction underlines fears that a severe slowdown, even a broad European recession, could be looming.
European Central Bank president Jean-Claude Trichet, announcing unchanged interest rates on Thursday, recognised evidence of weakening of the eurozone economy in comments which sent the euro into a tailspin.
"These are the first GDP figures to come out and they anticipate a general setback in Europe," said an analyst at French investment bank BNP Paribas, Caroline Newhouse-Cohen, commenting on the Italian figures.
"Even if Italy is suffering from a more unfavourable situation than Germany or France, we have every chance of seeing a contraction of about 0.3 percent or more, in the whole of the eurozone."
She added: "Even the German GDP, expected next week, is likely to show a fall of 0.8 percent."
A recession is defined as two consecutive quarters or more of economic contraction.
The dollar has slumped against the euro and other currencies in the past year amid slowing US economic growth, but it has started to rebound recently amid concerns about eurozone, and particularly German, growth.
"A full-fledged adjustment phase has begun for the euro," Bank of Tokyo-Mitsubishi UFJ dealer Akira Kato told Dow Jones Newswires. "Players who have been bullish on the euro are now unwinding long (buy) positions."
The dollar also drove back high-yielding currencies such as the Australian and New Zealand dollars, amid concerns about weakening economic conditions in those countries.
"Their economies are losing growth momentum, and the central banks there are signalling a near-term rate cut," said Tsuyoshi Ueda, head of foreign exchange at margin-trade broker Gaitame.com.
The greenback rose despite a slump on Wall Street Thursday triggered by an unexpected rise in US jobless claims and fresh financial troubles.
The British pound was also under pressure after the Bank of England kept its key rate steady at 5.0 percent on Thursday in the face of slowing economic growth and high inflation.
In London trade on Friday, the euro changed hands at 1.5049 dollars against 1.5321 late on Thursday, at 165.51 yen (167.72), 0.7837 pounds (0.7882) and 1.6253 Swiss francs (1.6276).
The dollar stood at 110.06 yen (109.46) and 1.0806 Swiss francs (1.0622).
The pound was at 1.9187 dollars (1.9435).
On the London Bullion Market, the price of gold fell to 852.50 dollars per ounce from 871.50 dollars late on Thursday.
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AFP
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