LONDON (AFP) - The dollar fell sharply across the board after breaking through the 1.2370 price barrier against the euro, amid caution ahead of this weekend's Group of Seven meeting and as oil prices remain at very high levels.
The single European currency rose to 1.2420 dollars from 1.2330 late on Wednesday in New York.
The dollar eased to 110.22 yen from 110.84 on Wednesday.
The euro reached 10-week highs against the dollar, breaking beyond 1.24, as traders in the United States entered the market.
"The market has been defending the 1.2370 barrier for some time and, once this was tripped, everyone moved in on the back of it, taking the dollar lower across the board," said Neil Mellor, currency strategist at Bank of New York.
US data released Thursday had little impact, as the market shrugged off positive Chicago PMI data.
The monthly regional index of manufacturing jumped four points to 61.3 percent in September, suggesting strengthening industrial activity in the midwest. Any number over 50 indicates growth. Economists had predicted a figure of 58 percent.
US weekly jobless claims rose by 18,000 to 369,000 last week, the highest level since February, though the data was exaggerated due to the effects of hurricanes in the country.
Meanwhile, US personal incomes rose by 0.4 percent in August, in line with expectations, while spending remained flat for the second month running.
"The market is too preoccupied with oil and the G7 meeting to take too much notice of data. Investors will not be wanting to go into the weekend holding any significant positions," Mellor said.
The US government has been putting pressure on China to change its policy of pegging its currency to the dollar. Although many are sceptical that China will yield to this at this weekend's G7 meeting of leading industrialized nations, financial markets remained cautious until the meeting is over.
Meanwhile, oil prices began to turn higher again, with US crude futures moving back towards 50 dollars. Analysts said worries over disruption to supply in Nigeria had begun to outweigh Wednesday's positive news of an unexpected rise in US crude stocks.
Elsewhere, the pound rose against the dollar, tracking the dollar's slide, but continued to weaken against the euro after the morning's Nationwide house price survey for September continued to show subdued growth.
The survey showed British house prices had risen just 0.2 percent from August and said activity was set to remain at lower levels over the coming months.
Growing evidence of a cooling in the British housing market has caused the market to reconsider its view on the outlook for British interest rates, with most seeing little scope for further hikes by the Bank of England.
"This latest housing market report adds to the weaker batch of data received this week which, taken together, have got the markets into thinking that a further rate hike looks much less likely than it did," said Deutsche Bank analyst George Buckley.
The euro was changing hands at 1.2420 dollars against 1.2330 late on Wednesday in New York, 136.85 yen (136.64), 0.6863 pounds (0.6848) and 1.5488 Swiss francs (1.5537).
The dollar stood at 110.22 yen (110.84) and 1.2471 Swiss francs (1.2588).
The pound was at 1.8103 dollars (1.7995), 199.49 yen (199.52) and 2.2576 Swiss francs (2.2662).
On the London Bullion Market, the price of an ounce of gold stood at 415.65 dollars against 412.95 late on Wednesday.