It went down to $1.2234 yesterday (May 17th 2010), its lowest level since April 2006.
The fall has been partly attributed to comments made by German chancellor Angela Merkel in the wake of the â¬750 billion ($929 billion) bailout package agreed for the eurozone earlier this month, reports the Guardian.
"We've done no more than buy time for ourselves to clear up the differences in competitiveness and in budget deficits of individual eurozone countries," Ms Merkel warned.
The euro did manage to recover some of its position towards the end of the day, as it was announced Greece will take on its first emergency loans tomorrow and the European Central Bank pledged to take â¬16.5 billion off the money markets to cover for bond purchases.
Earlier this week, German finance minister Wolfgang Schauble called on other eurozone countries to consider introducing similar budget laws to the ones that have been introduced in Germany, reported the Financial Times.
Under the legislation, the federal government can run a budget deficit no higher than 0.35 per cent from 2016.
By Claire Archer