The U.S. dollar fell to the latest in a series of record lows against the euro on Monday as a heightened security alert in the United States provided fodder for dollar bears in a seasonally-thin market.
The U.S. government raised its terror alert on Sunday to "orange", the second-highest level, saying there was a high risk in the holiday period of an attack that could be even bigger than the events of September 11, 2001.
The dollar fell more than half a percent to $1.2447 against the euro in a skittish European session, notching up its fourteenth record low in 17 trading sessions. The U.S. currency also came within a whisker of last week's seven-year low against the Swiss franc.
"Momentum and positioning indicators are looking stretched but this is not yet sufficient to turn the trend," said Steven Pearson, chief currency strategist at Halifax Bank of Scotland.
"Terror fears are keeping the market jittery and European corporates are keen to hedge dollar weakness going into next year."
Analysts noted the euro had stopped just short of $1.2450, an area of key chart resistance and the equivalent of the German mark's 1987 high against the dollar.
The dollar also gave ground to the Japanese yen, gathering downward momentum after breaking below chart support at 107.50 yen.
The greenback was down a third of a percent at 107.42 yen at 1040 GMT, less than a yen away from three-year lows set earlier this month.
Economists expect U.S. gross domestic product data on Tuesday and durable goods orders on Wednesday to reinforce the view that the world's biggest economy is recovering fast.
However, few expect a reprieve for the dollar with many arguing that a combination of ultra-low U.S. interest rates and a strong global recovery will make it even harder for the United States to attract enough capital to offset its current account deficit.
"The current account deficit is a long term factor and the fundamental drivers of dollar weakness remain strong," said Bilal Hafeez, foreign exchange strategist at Deutsche Bank.
The market showed little reaction to weekend confirmation by the Japanese government that it would raise the borrowing limit for its foreign exchange intervention account.
Japan's willingness to sell yen for dollars to maintain export competitiveness means European currencies have borne a greater weight of the dollar's decline.
The euro has risen more than 18 percent against the dollar since the start of the year, compared with the yen's advance of less than 10 percent.
