The euro fell on Thursday when the European Central Bank (ECB) was expected to cut eurozone interest rates to record low levels to help stimulate the recession-hit bloc.
The European single currency dropped to 1.2593 dollars in trading here, from 1.2657 dollars late on Wednesday in New York. The euro was also lower against the yen and British pound.
Against the Japanese currency, the dollar gained to 99.45 yen from 98.98 yen on Wednesday.
The pound steadied against the dollar as the Bank of England (BoE) also prepared to announce an expected cut in British interest rates to record low levels with Britain also hit by recession.
"The focus of the foreign exchange market is now clearly on the monetary policy announcements from the BoE and ECB," said Derek Halpenny, European head of global currency research at The Bank of Tokyo-Mitsubishi UFJ.
"In the case of the BoE we expect a 0.50-point cut to 0.50 percent along with an announcement to purchase a set quantity of government paper in order to expand the monetary base.
"Any formal announcement of quantitative easing (QE) should include an initial amount agreed between the government and the BoE and specifically what assets are to be purchased."
Halpenny added: "We also expect the ECB to cut by 0.50 point to 1.5 percent. However, the ECB is nowhere near implementing QE." The BoE's rate call is due at 1200 GMT, 45 minutes before the ECB's decision.
The dollar rose against leading currencies after Washington unveiled a new plan to shore up the troubled US housing sector.
"The dollar continues to be supported by the view that the United States is taking stimulus measures faster than other economies," Hachijuni Bank chief forex strategist Masatsugu Miyata said.
Investors were encouraged by Washington's launch of a 75-billion-dollar scheme to stem rising home foreclosures.
The euro was changing hands at 1.2593 dollars against a level of 1.2657 dollars reached late on Wednesday, at 125.24 yen (125.29), 0.8870 pounds (0.8916) and 1.4195 Swiss francs (1.4195).
The dollar stood at 99.45 yen (98.98) and 1.1737 Swiss francs (1.1683).
The pound was at 1.4195 dollars (1.4195).
On the London Bullion Market, the price of gold rose to 912 dollars an ounce from 908.50 dollars an ounce on Wednesday.
