The euro on Friday rose close to 1.40 dollars, reaching the highest point for more than four months as the greenback was weakened by concerns about high US debt, dealers said.
In London trade, the European single currency hit 1.3978 dollars. It later pulled back to 1.3947 dollars, compared with 1.3887 dollars late on Thursday in New York.
The dollar fell to 94.20 yen from 94.42 yen late Thursday. It pulled back however from a two-month low struck in Asian trade on Friday.
"As the weekend beckons, the dollars remains on the back foot," said Calyon analyst Stuart Bennett.
The dollar is being hit by fears about a potential downgrade of the US government credit rating.
While there was no specific news about the US sovereign rating, a warning by Standard & Poor's on Thursday of a possible downgrade of Britain's rating prompted fears the United States might be next, dealers said.
"Confidence in the US economy seems to be weakening," Masanobu Ishikawa, a foreign exchange manager at Tokyo Forex and Ueda Harlow, told Dow Jones Newswires.
The yen was meanwhile winning support after Japan said it had no plan to intervene in the market to curb its currency's rise.
Japan's Finance Minister Kaoru Yosano said Tokyo had no plan to take action to tackle the strength of the yen, which is bad for exporters.
"We aren't at all thinking about intervening in the foreign exchange market at this point," Yosano told reporters.
Traders seized on the comments to further drive down the dollar as low as 93.86 yen during Asian trade -- the weakest level since March 19.
"Investors now feel more at ease to sell the dollar," said Saburo Matsumoto, chief foreign exchange strategist at Sumitomo Trust and Banking.
"They seemed worried about possible intervention by the government after the dollar fell below 95 yen. But after the minister's remark, there is nothing to hold them back," he said, predicting the greenback could fall further.
In London trade Friday, the euro was changing hands at 1.3947 dollars against 1.3887 dollars late on Thursday, at 131.39 yen (131.13), 0.8823 pounds (0.8765) and 1.5193 Swiss francs (1.5191).
The dollar stood at 94.20 yen (94.42) and 1.0892 Swiss francs (1.0935).
The pound was at 1.5772 dollars (1.5842).
On the London Bullion Market, the price of gold jumped to 952.30 dollars an ounce from 937.50 dollars an ounce late on Thursday.
