The dollar extended gains as investors continued a flight to safety fueled by an unexpected rise in US weekly jobless claims and weaker-than-expected Greek growth.
Global stock markets also fell as the data added to renewed fears of a double-dip recession following disappointing import figures from China, a downgrade of the economic outlook for the US by the Federal Reserve and lower forecasts for UK growth earlier in the week.
On Wall Street, the Dow Jones was down 0.8pc soon after the open, while the broader S&P 500 fell 0.9pc and the technology rich Nasdaq lost 1pc. Lower-than-expected sales at Cisco, the network equipment maker, added to the jitters.
In Europe, the FTSE 100 index of leading British shares was down 0.5pc, Germany's DAX 0.7pc, and the CAC-40 in France 1pc.
The euro slid to a three-week low against the dollar after figures showed Greece's economy shrank more than expected in the second quarter, underscoring concerns about the euro zone's recovery.
US data showed the number of Americans filing new claims for unemployment insurance rose unexpectedly in the latest week to its highest level in close to six months.
"Investors were aware of a slowdown in the US economic recovery but now there are concerns other economies won't be able to decouple from slower growth here and in China," said Jessica Hoversen, fixed income and currency analyst at MF Global in Chicago.
"Markets are repricing and with that, we are likely to see some dollar strength."
The dollar rose against the pound to trade at $1.5593.
