The dollar has fallen to another record low against the euro, amid mounting worries over the US' tightly-stretched public finances.
The greenback is set to fall further, analysts say
The euro hit $1.2985, against Friday's previous record low of $1.2973, before the dollar regained some ground.
The decline reflects market speculation that US public spending will continue to outstrip government revenues under President Bush's second administration.
The dollar is expected to fall further, denting European and Asian exports.
"The euro-dollar's break of $1.30 is only a matter of time," said Naomi Fink, currency strategist at BNP Paribas.
"It's just a question of momentum."
The dollar stood at $1.2953 per euro by 1533 GMT. Against the yen it was trading at 105.42 yen, having earlier fallen to 105.30 yen - its lowest level since April.
The US currency has been weakening for much of the past year, pressured by worries over the US' record $427bn budget deficit.
But the pace of the dollar's decline has picked up since President George W Bush - whose heavy spending has pushed the US finances into the red - was elected to a second term in office last week.
The currency markets are also concerned about the US current account deficit, which hit a record $166bn in the second quarter of 2004.
The weaker dollar will make European and Asian exports more expensive, and hence less competitive, in the US.
Analysts warned that this could seriously dent the European economy, which relies on exports for much of its growth amid sluggish domestic demand.
"The main source of growth is external demand," Joanne Collins, senior economist at Daiwa SMBC, told the BBC's World Business Report.
"This loss of competitiveness is what European exporters could do without."
The euro is now up by 57% from its all-time low of $0.82, recorded in October 2000.
European Central Bank President Jean-Claude Trichet said on Monday that the recent weakness of the dollar was unwelcome.
"The recent moves, which tend to be brutal on the exchange markets between the euro and the US dollar, are not welcome from the standpoint of the ECB," he said.