Euro zone inflation data on Friday showed a surprise drop to 0.7 percent year-on-year in January. Analysts had expected a rise to 0.9 percent.
The fall could be a trigger for further easing by the ECB, which holds its policy review next week, to sustain a fragile recovery and ward off a falling price spiral that could cripple the economy for years.
The euro fell 0.4 percent against the dollar at $1.3502 after touching its lowest level since late November.
The single currency also hit a two-month trough against the yen, last down 0.8 percent against the Japanese currency at 138.11 yen.
The euro is on track to suffer its biggest monthly drop versus the dollar in 11 months and the steepest monthly decline against the yen since July 2012.
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Trading volumes were light with large parts of Asia on holiday for the Lunar New Year.
Meanwhile, risk aversion hit commodity-related currencies, with the Canadian dollar falling to a 4-1/2-year low. The loonie last traded at C$1.1176 per dollar in the wake of weaker-than-expected data on Canadian growth in November.