U.S. stocks fell, led lower by the financial sector, after a downgrade of Merrill Lynch sent its stock down about 11 percent. That trimmed the yen's losses and kept downward pressure on the dollar.
"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 Bedminster, New Jersey.
He added that the positive impact from U.S. payrolls has completely faded and the market has been spooked by "all sorts of rumors about possible write-downs" at big banks.
"The market always views euro/dollar as a 'buy on dips' regardless of the data."
The euro surged to an all-time high at $1.4525, according to Reuters data. It last traded at $1.4490 midday in New York, up 0.5 percent on the day.
In London, shares in Barclays fell sharply on market talk of funding worries and concern Britain's third-largest bank was telling analysts to trim profit forecasts.
Given increasing problems in the financial sector, the U.S. interest rate futures market has priced an 84 percent chance the Fed will lower benchmark rates again in December, up from as low as 58 percent following the U.S. employment report.
The report showed employers added 166,000 new jobs last month, up from a revised 96,000 in September, and it initially encouraged investors to get back into risky carry trades.
In carry trades, investors sell the low-yielding yen to buy assets with higher returns such as the Australian and New Zealand dollars. The euro, U.S, and Australian dollars, among other currencies, posted gains against the yen, as a result, and moved the focus away from non-farm payrolls.
Analysts said while the jobs data for October suggested the U.S. economy was probably more resilient than many initially thought, the details were not as impressive as the headline figure suggested. In particular, they cited softness in retail and manufacturing employment, including earnings data.
Overall the report was consistent with the view that the U.S. economy was decelerating and that inflation was not really a major threat.
The dollar index, which charts the greenback's progress against a basket of six major currencies, fell as low as 76.242 <.DXY>, the lowest in its more than 30-year history. It was last at 76.407, down 0.2 percent.
The dollar was up 0.2 percent against the yen at 114.79 yen
"Today it looks as if we are back in panic mode, but I believe this is partly a reaction to the irrational exuberance of equities over the last several weeks," wrote Marco Annunziata, chief economist at HVB Bank in London.
"I still believe it will take quite a while for the crisis to be resolved, and a policy solution will likely be needed to help unfreeze credit markets," he added.
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