The euro approached $1.40 on Friday, with the shared currency approaching its highest levels since the opening days of 2009 as traders looked for alternatives to the U.S. dollar.
The euro climbed as high as $1.3981, up from $1.3902 late Thursday, in a session with very few economic releases.
The British pound also demonstrated resilience, shaking off the momentary lows around $1.55 on Thursday after Standard & Poor's said it might downgrade the U.K.'s Triple-A credit rating to trade at $1.5880 on Friday.
And the dollar fell to 94.02 yen from 94.34 yen as Japanese officials said they wouldn't intervene in the currency market to keep down the recently sizzling Japanese unit. See full story.
Currency action appears to be focused on the selling in the U.S. bond market, where the 10-year Treasury bond fell below a crucial level.
"The trend of dollar selling carried on overnight and lifted euro/dollar above 1.39 and pound/dollar back above 1.3850. U.S. 10-year yields spiked to 3.38% on talk of overseas selling into the Fed purchase, the supply announcement for next week and hawkish comments by FOMC member Plosser. The technical move beyond 3.25% is powerful and could trigger concerns of further upside and rising mortgage rates," said Kenneth Broux, an economist at Lloyds TSB Corporate Markets.
The dollar index , a measure of the greenback against a host of currencies, fell 0.4% to 80.32.
