Encouraging US employment data has failed to stem the falls in the US dollar, which has ended at a new record low against the euro in New York.
Suggestions that eurozone rates will rise is boosting the euro
The euro's value settled at $1.4525, while the dollar also plunged to a new 26-year low against the UK pound, settling at $2.0890.
The dollar sell-off came despite a surprisingly good report on jobs in the US, a key indicator of economic health.
Analysts said the news was not enough to shift negative dollar sentiment.
The pound's latest surge against the greenback began at the start of the week in anticipation of the Federal Reserve's decision on US interest rates.
Following the Fed's move to reduce rates from 4.75% to 4.5%, sterling rose to its highest level against the dollar since 1981, when one pound was being traded at $2.4270.
This level was, in turn, surpassed in afternoon European trade on Friday, while the euro fluctuated but hovered around the $1.45 mark.
The US interest rate cut will make the rate of repayment for consumer debt and home loans cheaper but it also means investors are looking to buy other currencies which will give a higher rate of return.
The pound has benefited from expectations that the Bank of England will keep UK interest rates unchanged at 5.75% when policymakers meet next week.
Meanwhile, indications that the European Central Bank may soon raise rates in the eurozone beyond 4% has supported the euro.
Many analysts believe continuing troubles at major financial companies is outweighing the impact of recent positive economic data, the latest showing 166,000 jobs were created in the US in October - much better than predicted.
Swiss bank Credit Suisse was the latest bank to issue sharply lower profits for its third quarter as a result of bad investments centred on the crisis-hit US housing market.
Some now take the view that full-year earnings for many banks in Europe and US will not meet expectations because of the housing slump and the knock-on effect on credit markets.
This assessment is hurting bank shares on both sides of the Atlantic and dragging down stock markets across the world.
"The focus of the market right now is on the financial sector and we are tracking the stock market," said Brian Dolan, chief currency strategist at Forex.com in New Jersey.