The European single currency, which hit its all-time high of $1.3666 in December 2004, surged past $1.36 on Wednesday while sterling hit a near 26-year high against the US currency.
The euro in late trade on Thursday had eased back to $1.3605 from $1.3607 late on Wednesday in New York. The pound sterling, after rising to $2.0133 on Wednesday was trading at $2.0024.
The US currency slipped to 118.37 yen from 118.66 on Wednesday.
Rising European interest rates are luring foreign investors to make short-term deposits in euros and pounds, increasing the currencies' values on the foreign exchange market.
The dollar is under pressure because dealers are worried about an apparent economic slowdown in the United States - while European economies are showing signs of strengthening.
As a result, the market continues to focus on prospects for further interest rate rises in Britain, the eurozone and Japan, where they stand currently at 5.25%, 3.75% and 0.5% respectively.
At the same time, many market watchers believe the US Federal Reserve will cut its interest rates later this year from the current level of 5.25%.
The European Central Bank said today inflation was still a threat to the eurozone economy, hinting that it might have to raise interest rates further.
