The dollar's renewed weakness was triggered by comments from US Treasury chief John Snow, who hinted that Washington's commitment to a strong currency was wavering.

Speaking after this weekend's meeting of Group of Eight finance ministers, Mr Snow described recent currency fluctuations as "fairly modest".

His relaxed assessment of the dollar's decline put the greenback under renewed pressure on the international currency markets.

By 2100 GMT, the euro had fallen back slightly with one euro buying $1.167. It had reached as much as $1.173 on Europe's currency markets earlier in the day, before retreating again.

Since the start of the year, the euro has gained about 30% on the dollar.

"Snow seemed to give a green light to selling," said Rob Hayward at ABN Amro.

Dollar in retreat

The US currency's value fell across the board, reaching its lowest level against the Swiss franc since October 1998, and falling sharply against the Japanese yen.

At one point one dollar bought just 115 yen, before the currency rebounded again following rumours that Japan's central bank had intervened in currency markets.

"It is either intervention, or fears of intervention," said Credit Agricole Indosuez currency strategist Adam Cole in an attempt to explain the wild swings in the dollar-yen relationship.

Policy change?

The US government has traditionally been in favour of a strong dollar, but is thought to have relaxed its stance in recent weeks.

In a television interview last week, Mr Snow noted that a weaker currency was helping to boost exports, leading to speculation that Washington may welcome the dollar's fall as a means of kick-starting economic growth.

The dollar's slide reflect doubts about the health of the US economy after two and a half years of at best tepid expansion.

Other factors include rock-bottom US interest rates and the country's large and growing trade deficit with the rest of the world.