The euro came within half a penny of the four-year low of $1.2146 set last Wednesday. By late morning in New York, Europe's shared currency rallied back from Tuesday's low of $1.2176 to trade at $1.2250 but was still down from $1.2398 late Monday.
The euro has dropped about 15 percent this year as the debt crisis in Greece roiled credit markets, forcing the International Monetary Fund and the European Union to put together a nearly $1 trillion financing deal to stem fears of default from spreading to other countries.
But the deal quickly triggered concerns about European economies contracting because cuts in government spending and raised taxes are also mandated by the aid package.
On Tuesday, the Italian and Danish governments paved the way for spending cuts, while Queen Elizabeth II laid out the UK's austerity plan. European countries are slashing budgets to convince investors that they can manage their debt loads.
"If there was a doubt about it, there isn't any more. The European debt crisis is not simply a Greek phenomenon," said Marc Chandler of Brown Brothers Harriman in New York.
Over the weekend, the debt crisis leached into Spain, a much larger European economy, as the Spanish central bank bailed out one regional bank. Four other regional banks will be combined because of insolvency worries. The International Monetary Fund said on Monday that Spain needed more far-reaching economic reforms to emerge from the financial crisis.
The troubles in Europe and the prospect of its hit to the global economy are frightening investors, driving them to buy safe-haven dollars, said UBS AG analyst Geoffrey Yu.
Tensions between North and South Korea are also worrying traders into buying dollars, he said.
In other midmorning trading, the British pound slid to $1.4329 from $1.4443 and the dollar rose to 1.1622 Swiss francs from 1.1573 francs. But the dollar dropped to 89.69 Japanese yen from 90.45 yen. The yen is also viewed by some investors as a safe bet in times of global economic turmoil.
The dollar soared against "commodity currencies," or currencies of countries that are big commodity exporters. A stronger economy would require more exports, while a slowdown in global trade and in the Chinese economy would hurt demand for metals and energy. The US currency hit an 8-month high versus the Canadian dollar at 1.0851 before backing off to 1.0811 Canadian dollars versus 1.0576 Canadian dollars late Monday. It moved sharply higher against the Australian and New Zealand dollars, the Scandinavian currencies and the Brazilian real.
The dollar also gained nearly 3 percent versus the South Korean won as North Korea said its army was bracing for war against its neighbor.
