The euro hit a three-month low against the dollar on Wednesday as investors fled risky currencies after a sharp contraction in the Australian economy, dealers said.
The European single currency struck 1.2457 dollars in Asian trade. Later in London deals, the euro recovered to 1.2517 dollars, but still under its level of 1.2556 dollars reached late Tuesday in New York.
Against the Japanese currency in London trade, the dollar rose to 99.21 yen from 98.15 yen on Tuesday.
"The dollar continued to advance across the board as it was seen as better than other currencies given the terrible economic situation everywhere," said Marito Ueda, foreign exchange dealer at FX Prime.
Australia's economy unexpectedly shrank 0.5 percent in the fourth quarter of 2008, putting the country on the brink of recession and weakening the Australian dollar.
The yen meanwhile also fell against the greenback as Japan's opposition leader Ichiro Ozawa, seen as a potential future prime minister, dismissed calls to resign after a close aide was arrested in a fundraising scandal.
"Worries are mounting over the European economies as well as the Japanese economy, where political turmoil is expected with a new scandal involving the opposition," said Ueda at FX Prime.
The euro was under pressure ahead of Thursday's meeting by the European Central Bank, which is widely expected to slash its key lending rate by 50 basis points to 1.5 percent.
The Bank of England is also expected to slash its key interest rate on Thursday by half a percentage point to just 0.5 percent -- the lowest level in the bank's 315-year history, analysts said.
Analysts said the BoE's nine-member monetary policy committee (MPC) may also announce plans for so-called quantitative easing -- a last-ditch effort to increase money supply -- as it becomes clear that lowering rates has failed to stimulate the economy sufficiently.
Dealers added that the dollar was winning support from the view that Washington is taking swifter action to tackle the economic crisis compared with the eurozone and Japanese authorities.
"The dollar is firmer because the US policymakers have presented remedies relatively quickly compared with other regions, not because the US economic fundamentals are actually strong," Ueda added.
The Hungarian forint plunged to a record low point of 312.20 to the euro on Wednesday, then rallied to 309.63, against a background of controversy over the depth of strains in economies in the region.
The euro was changing hands at 1.2517 dollars against a level of 1.2556 dollars reached late on Tuesday, at 124.18 yen (123.26), 0.8901 pounds (0.8937) and 1.4785 Swiss francs (1.4765).
The dollar stood at 99.21 yen (98.15) and 1.1810 Swiss francs (1.1758).
The pound was at 1.4064 dollars (1.4050).
On the London Bullion Market, the price of gold rose to 916 dollars an ounce from 913.75 dollars on Tuesday.
