The single European currency is likely to continue its fall even if European Union leaders, including European Central Bank officials, agree on a solution to the debt crisis, according to analysts.
They said they saw the euro falling as low as $1.20 from its current level and only accelerating to parity with the US dollar if a country is forced to exit the euro zone.
The ECB left its main interest rate unchanged amid calls by analysts and investors for the central bank to print money or at least step up its security markets program, under which it buys bonds issued by troubled euro zone countries in the secondary markets.
Earlier on Thursday, successful Spanish and Italian auctions of shorter-term debt offered a welcome breather for crisis-weary European bond markets.
The euro has been on a downward path against the dollar since November, when the possibility of Greece exiting the euro zone was mentioned officially for the first time.
"Irrespective of whether policymakers (including the ECB) reach an agreement to stabilise the government debt crisis or not, we believe the euro will fall," the ING analysts wrote in a market research note.
"The euro area credit crunch is a reality, and the euro zone requires softer monetary conditions, including a weaker euro."
A poll by the Japanese investment bank Nomura earlier in the week showed the majority of investors who responded would be long the US dollar and would fund this position by being short euro.
'Problematic' First Half
The first half of the year will be "problematic" and this is when the euro will fall further while the US dollar will enjoy further strength against commodity-backed and emerging market currencies, according to the ING analysts.
However, the ING analysts said that short positions on the euro "now stand at a record" and if the currency is to fall further from here, a "different community of sellers" must emerge.
"Among that group we would place corporates, institutional investors and FX reserve managers, all of whom we expect to be reducing euro exposure through the first half of this year," they wrote.
The revival in the US dollar is likely to extend for three or six months, as the greenback benefits from the woes of its European rival, the ING analysts said.
But analysts at Lloyds Bank Corporate Markets pointed out that a general recovery in positive sentiment could provide the euro with "a significant boost" in the short run, simply because of "heavy short positioning."
However, the euro's response to stronger global data "is likely to be muted by the perception that it will take a long time for growth to be strong enough for the ECB to contemplate tightening, given the depth of the austerity programs in the euro area," the Lloyds Bank analysts wrote in a market note.