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By 12:35 BST, the single European currency was down by around 1.2 per cent at $1.2165 (83.3p), having earlier dropped to $1.2112 - the lowest since 2006, Reuters reports.
Demand for the dollar - which is seen as a safe-haven currency - has been boosted by the tensions that have emerged following Israel's decision to attack ships carrying aid for Gaza.
And risk appetite was hit by the news China's purchasing managers index dipped in last month.
Commenting, strategist for ING FX Tom Levinson was quoted by the news agency as saying the European Central Bank's (ECB's) stating that eurozone banks will be hit by loan losses of up to €195 billion (£162 billion) over the next 18 months was also a factor in the euro's fall.
We're seeing follow-though selling after the ECB warning," he remarked.
Earlier in the day, sterling had dropped against the dollar but gained against the broadly weaker euro.
Posted by Chris Weaver
