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LONDON: The dollar extended its dramatic fall on Friday, putting it on course for its biggest monthly drop in a decade as investors fretted that a rebound in the US economy would be derailed by the struggle to stem the coronavirus epidemic.

Weakness in the US currency propelled the euro higher, with the single currency touching $1.19, its strongest since May 2018, and enjoying its biggest monthly gain since September 2010.

Confidence in the dollar was undermined further after US President Donald Trump on Thursday raised the possibility of delaying the November presidential election. That came on the same day advance gross domestic product (GDP) data showed contraction of an annualised 32.9% in the second quarter, the quickest pace since the Great Depression.

The dollar index slid as low as 92.546 in early trading on Friday, a level last seen in May 2018, before recovering to trade flat at 92.847. It has fallen nearly 5% in July, with most of the drop coming in the last 10 days as new cases of coronavirus surged across several US states and some recent data pointed to an economic recovery losing steam.

Unicredit analysts said they "continue to expect the USD weakness to persist in August, a month in which abrupt moves in intraday activity tend to be more likely due to lighter market conditions."

But they said that given global economic growth concerns and worries about further Covid-19 developments, and the depreciation the US dollar has already suffered in recent weeks, downward pressure would be "less intense" over the next month.

The euro surged to as high as $1.1908 before settling at $1.1854, up 0.1% on the day. The currency was little moved by data showing the euro zone economy recorded its deepest contraction on record in the second quarter while the bloc's inflation unexpectedly ticked up in July.

The euro traded below $1.10 as recently as May, but after European Union leaders agreed this month to a 750 billion euro economic recovery fund - while also taking on debt jointly in a major boost to regional cooperation - many investors have warmed to the currency again. On a trade-weighted basis, the euro is at its highest since 2014.

"Disinflationary pressure from the unprecedented hit to demand alongside the strengthening euro will keep pressure on the ECB to deliver further policy stimulus," MUFG analyst Lee Hardman said.

The dollar's drop this month has created space for a rebound in currencies hit hard in March, when investors rushed for the safety of the greenback as panic over the coronavirus gripped markets.

Against the yen, the dollar hit a 4-1/2 month low of 104.195 yen and last stood at 104.64, having lost 3.3% this month. The British pound surged to $1.3143, a 4-1/2 month high. It was slightly stronger versus the euro at 90.33 pence.

The Swiss franc extended its rally against the dollar, with the US currency at its weakest since early 2015 and last down another 0.1% at 0.9077 francs.