The euro had broken above $1.4500 to reach $1.4507, its highest level since Dec. 18, before retreating slightly.
With the single currency having smashed through the summer's ranges, its next important ceiling is $1.4720, the high it also reached in December last year, said analysts. In the short run, the euro is seen in a range between $1.4450 and $1.4600.
The dollar's decline, which began overnight in Asia and Europe, is broad and extensive. The greenback is down against higher-yielding and commodity-based based currencies across the globe. The dollar index, a measure of the greenback's performance against a basket of six currencies, fell to a new 2009 low of 77.14, a level last seen in September 2008. The dollar index is now at 77.25.
The dollar had been in its previous ranges "for a very long time, and it's been waiting for a catalyst to sort of break it out of its paralysis," said Jessica Hoversen, fixed income and foreign exchange analyst at MF Global in Chicago
Those catalysts included a weekend G20 meeting during which finance ministers said they would maintain fiscal stimulus measures, higher oil prices and improving economic data from the euro zone and Australia.
U.S. stocks, which risk-sensitive currencies have tracked in recent months, opened higher, but did not appear to give further support to the euro and other high-yielding currencies.
Gold is putting pressure on the dollar. The precious metal is trading above $1,000 an ounce Tuesday for the first time since February. Strength in Asian and European stock bourses helped prompt buying in gold, said Larry Young, senior trader with Infinity Futures.
"It appears it was the beginning of some important asset shift changes, which are now also weighing on the dollar," said Scotia analysts.
Investors could be buying gold as a hedge against deflation or inflation, said Andrew Wilkinson, senior market analyst at Interactive Brokers in Connecticut.
"This is an important development as it leaves the major dollar downtrend intact and highlights that sentiment remains dollar bearish," said analysts at Scotia Capital in Toronto.
Even the safe-haven Swiss franc is putting pressure on the greenback. The dollar fell to its lowest levels against the franc since December.
Early Tuesday in New York, the euro was at $1.4477 from $1.4301 late Friday, according to EBS via CQG. The dollar was at Y92.23 from Y93.03. The euro was at Y133.50 from Y133.06. The U.K. pound was at $1.6535 from $1.6400, and the dollar was at CHF 1.0472 from CHF1.0606.
Investors seem to be increasingly convinced of a global economic recovery as good overnight data on German exports, and the state of the Australian economy, is fueling risk appetite, leading investors to flow into the euro.
"The euro has been on the rampage overnight," said Neil Mellor of the Bank of New York Mellon.
Investors appeared to be still taking their cue into higher-yielding currencies from G20 assurance over the weekend that there is no hurry to bring an end to the extraordinarily easy monetary policy in most major economies.
Weighing on the dollar are comments in the United Nations' annual trade and development report, which urges the creation of a new world reserve system using several currencies, as opposed to just the dollar.
" We do not think the UN will prove the most important voice in the reserve currency debate, but do think that it adds yet another voice and one that is decidedly against the dollar," Scotia analysts said.
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