The dollar sank to record lows against the euro and a major currency basket on Friday, as persistent worries about unreported losses at financial firms overshadowed a strong U.S. payrolls report.
Major U.S. stock indexes fell as much as 1 percent, dragged down by financial stocks, which helped wipe out a brief dollar gain after the Labor Department reported a 166,000 gain in non-farm payrolls, the biggest jump in six months.
"There's fear over more skeletons falling out of the credit market closet," said Scotia Capital currency strategist Steve Malyon.
"That overwhelmed any dollar-positive sentiment that might have been generated by the stronger-than-expected gains in the headline payroll number."
Even though major stock indexes reversed losses in late trade, financial stocks were hard hit, falling 1.5 percent, led down by Merrill Lynch after Deutsche Bank downgraded its shares, saying the bank will suffer more billion-dollar write-downs on bad debt.
"The focus of the market right now is on the financial sector, said Brian Dolan, chief currency strategist at Forex.com in Bedminster, N.J.
The euro surged to an all-time high at $1.4525, according to Reuters data. It last traded at $1.4506, up 0.6 percent on the day.
Given increasing problems in the financial sector, the U.S. interest rate futures market has priced an 70 percent chance the Fed will lower benchmark rates again in December, up from as low as 58 percent following the U.S. employment report.
The dollar initially gained on the stronger-than-expected headline number, but soon reversed course.
Analysts also spotted weakness in employment component numbers, including economic cyclical sectors such as manufacturing and retail, the latter a particularly negative sign as the United States heads into the holiday season, normally a bonanza for retailers, Malyon said.
The dollar index, which charts the greenback's progress against a basket of six major currencies, fell as low as 76.220, the lowest level in its more than 30-year history and was trading in mid-afternoon at 76.320, off 0.36 percent on the day.
Against the yen, the dollar was up 0.2 percent at 114.53 yen.
With the dollar weakening so fast and so far, analysts said they had not heard of resistance levels.
"We're in uncharted territory for the euro and the Canadian dollar, since they've broken though historic highs," said Malyon. "The Australian dollar and the British pound are trading at the strongest levels in about a quarter century; that's longer than many people in the market have spent trading and analyzing currencies."
The Australian dollar hit a 23-1/2 year high on Wednesday of 93.44 U.S. cents. On Friday it gained 1 percent to 92.07 U.S. cents.
The British pound advanced Friday by 0.5 percent to $2.0890.