The intensifying European debt crisis drove the euro down to its lowest level against the dollar since January.
The euro traded at $1.3088 at midday in New York Tuesday. Earlier it sank as low as $1.3055. Late on Monday, it was worth $1.3186.
European leaders agreed last week to tighten rules on government spending in an attempt to contain the debt crisis, but investors remain wary of possible defaults by heavily indebted countries like Greece. Leaders put off until March a decision on whether to add more money to a bailout fund for euro countries. Analysts say more is needed to help calm jittery bond investors. Parliaments in some countries may also oppose the pact.
The other hope for saving the euro — the European Central Bank — has also, for now, disappointed investors. Some had hoped that the European Central Bank would step up its buying of struggling countries' debt, but the ECB has limited its debt purchases and ECB President Mario Draghi indicated at the bank's last meeting Thursday that large-scale bond buying was unlikely.
The decline in the euro reflects the widely held belief that "unlimited bond purchases by the ECB is the only way out of this crisis," analyst Kathleen Brooks of Forex.com wrote in a research note.
The European government debt crisis has spread from smaller countries on the periphery of the continent, like Greece and Portugal, and is now affecting larger nations like Italy and Spain. European banks are also parking more money at the ECB than they have all year rather than lending it to other banks, a signal of distress in the financial system.
Ratings agency Moody's said it is still considering lowering the credit ratings of all European Union countries, which could make it even more expensive for those countries to raise money from selling bonds.
The dollar was mostly higher against other major currencies. The British pound fell to $1.5539 from $1.5582.
The dollar was unchanged against the Japanese currency at 77.91 yen. The dollar rose to 1.0296 Canadian dollars from 1.0262, and to 0.9421 Swiss franc from 0.9370.