The US dollar slumped on Friday amid reports that China was seeking to diversify its vast foreign currency reserves, which are estimated to total US$1 trillion.
However, the US currency regained some ground later in the day as traders digested some weak French and Japanese economic readings.
At 10pm GMT, the euro was changing hands for US$1.2840, up slightly from US$1.2828 late Thursday.
The euro had soared as high as US$1.2901 in earlier trading, however, marking its highest level against the dollar since August 21, as concerns mounted that China would seek to reduce its dollar holdings.
The dollar dropped against the yen to ?117.53 from ?117.91 late on Thursday.
The British pound also gained against the dollar, raising at one stage as high as US$1.9179, its highest mark since April last year against the dollar.
"Comments by PBOC [People's Bank of China] Governor Zhou [Xiaochuan (周小川)] that the central bank is considering `lots of options' regarding its inventory of US$1 trillion reserves continued to reverberate throughout the foreign exchange markets tonight," said Boris Schlossberg, a currency strategist at Forex Capital Markets.
Zhou has said in public comments that China has a very clear plan to diversify its reserves, though he later denied that China has any plans to accelerate this diversification.
"The euro-dollar breached US$1.2900 and the [British] pound hit a 19-month high in early European trade. But the anti-dollar rally ran smack dab into negative economic data as both Japanese and European releases badly missed their mark," Schlossberg said.
The dollar regained some ground after data showed that French economic growth was stagnant in the third quarter from the second, coming in well below a consensus forecast for quarterly growth of 0.5 percent and suggesting a possible downturn going into next year.
Figures from French statistics agency INSEE showed the French economy registered zero growth in the third quarter compared with the second quarter, casting doubt on a government target of 2.3 percent growth this year.
"It's like a blow with a club," said an analyst at the Paris-based Asteres economic consultancy, Nicolas Bouzou.
Meanwhile, a key leading indicator of Japanese corporate capital spending tumbled unexpectedly in September, the government said Friday, dampening speculation about an imminent interest rate rise.
Japanese private-sector core machinery orders slumped by 7.4 percent in September, the Cabinet Office said, sparking concerns that firms are scaling back investment as the economy slows.
In late New York trade, the pound was being quoted at US$1.9107, up from US$1.9051 late on Thursday.
The dollar stood at 1.2415 Swiss francs, down from SF1.2427 Thursday.
The greenback dropped against the New Taiwan dollar on the Taipei Foreign Exchange on Friday, losing NT$0.051 to close at NT$32.819.
A total of US$811 million changed hands during the day's trading.
The US currency opened at the day's high of NT$32.890 and hit a low of NT$32.781.
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