The dollar weakened broadly on Wednesday, weighed by a rumour that Federal Reserve Chairman Alan Greenspan had a heart attack and further pressured by a weaker-than-expected US Midwest business activity index.
The euro rose more than 1 percent to $1.2323 as the dollar reeled from a one-two punch of the Greenspan rumour and news that the National Association of Purchasing Management-Chicago's business barometer showed slower-than-expected expansion in March.
Investors view the euro and particularly the Swiss franc as safe-haven currencies anytime news from the United States creates uncertainty.
The dollar fell more that 1.1 percent against the Swiss franc to 1.2654 francs in the immediate aftermath of the Greenspan rumour.
A Fed spokeswoman, speaking about an hour after the rumour first began roiling financial markets, said there was no truth to the rumour and that Greenspan was "fine."
Business activity in the US Midwest expanded in March for a 11th straight month but at a much slower pace than expected. The Chicago purchasing managers' index fell to 57.6 in March from 63.6 in February. Economists expected the index to decline to 61.5.
Meanwhile, US factory orders rose 0.3 percent in February after falling a revised 0.9 percent in January. Wall Street had expected a 1.5 percent gain.
Earlier, the dollar gave a muted reaction to data showing expensing business activity in New York City for the seventh straight month in March. The National Association of Purchasing Management-New York's business conditions index rose to 271.8 in March from 267.2 the month before and 257.3 in January.
The dollar plummeted against the yen on Wednesday, shattering a key psychological barrier near 105 yen to hit a four-year low as investors tested a reduction in yen-selling intervention by Japan going into the new fiscal year.
The 105 level had previously been considered the tolerance threshold for Japanese policymakers keen to prevent a strengthening yen jeopardising the country's export-led recovery.
Comments from Japanese Finance Minister Sadakazu Tanigaki that Japan had grown resilient to the stronger yen gave the currency another boost in the European session, lifting it to 103.45 yen to the dollar - its highest since April 2000.
"The comments from officials overnight also fed into sentiment from the markets perspective that there is perhaps more opportunity to sell dollar/yen at these levels," said Bob Lynch, currency strategist at BNP Paribas in New York.
On Wednesday morning in New York, the dollar was down 1.5 percent against the yen at 104.04 above session lows of 103.45 yen, a four-year low and its sharpest one-day fall against the yen this year.
The euro also succumbed to broad-based yen strength, falling to session lows at 126.63, its lowest since last November.
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