The European single currency sank below $1.23 this afternoon in the wake of poor US jobs data.
The euro dived to $1.2296, touching a low last seen on July 1, 2010, before recovering slightly.
Despite the weak data, investors sought safety in the dollar amid the euro zone's debt strains, traders said.
The US economy added only 69,000 jobs in May, pushing the unemployment rate up to 8.2%, the Labor Department said on Friday.
Monti, Hollande, Merkel, Rajoy summit on June 22
The leaders of Italy, France, Germany and Spain will hold a summit on the euro zone crisis on June 22 in Rome, the Italian government said today.
The summit will take place a week before the European Union holds its twice-yearly summit on June 28-29.
Taoiseach Enda Kenny and French President Francois Hollande are to put growth plans before the summit.
Italian Prime Minister Mario Monti hopes to mediate between the French and German positions on how to boost growth.
As well as the euro seeing big falls today, stock markets around Europe were also lower.
Frankfurt's Dax, which outpaced all other major European markets so far this year, was the worst performer as it fell 3.4% to a five-month low, while France's CAC-40 hit a six-month closing low as it ended down 2.2%.
The weak economic start to June came after a miserable May in which most markets gave up almost all the gains they had made since the turn of the year as the euro zone's debt crisis came back into sharp focus.
China said manufacturing activity grew at a much slower rate than expected in May, further confirming the world's number two economy is slowing rapidly after recent poor figures on trade, investment and industrial output.
The official purchasing managers index (PMI) fell to 50.4 from 53.3 in April, the China Federation of Logistics and Purchasing said. A reading above 50 indicates expansion, while a reading below 50 suggests contraction. And HSBC said its PMI for May stood at 48.4 compared with 49.3 in April.
The Chinese data helped to send Brent oil prices sinking under $98 a barrel for the first time in sixteen months.
Data today also showed euro zone unemployment stood at a record high of 11%, with Spain the hardest hit at 24.3% in April.
The news comes as Greece's political and economic future remains uncertain and Spain's banking sector is looking increasingly fragile, stoking fears that debt-laden Madrid could need an international bailout.
With investors still seeking refuge in safe-haven assets amid problems in Spain, the yield on 10-year German and French bonds hit new record lows today. The rate of return for investors on 10-year German Bunds on the secondary bond market fell to 1.158%, and the yield on French 10-year bonds fell to 2.278%, beating records set a day earlier.
Spain's yield meanwhile rose to 6.589% from 6.536% yesterday, bringing the spread between German and Spanish borrowing rates to 5.45 percentage points. For a euro zone country such as Spain, an interest rate above 6% is considered dangerous territory with respect to its ability to refinance public debt.
European leaders should ready big steps - Zoellick
European leaders must be ready to recapitalise banks in the event of a Greek exit from the euro zone currency bloc and assure funding for Spain to prevent an economic collapse, World Bank President Robert Zoellick said today.
Greek elections scheduled for this month could hasten the country's departure from the euro zone, should parties that wish to scrap the country's bailout programme prevail.
If Greece withdraws from the euro and European leaders do not act decisively to prop up banks, Zoellick wrote in a column in the Financial Times, the resulting crisis could push the continent into a "danger zone."
"Euro zone leaders need to be prepared - psychologically and through the European Stability Mechanism (ESM) - to recapitalise banks," Zoellick wrote.
"In the euro zone, the guarantees of some national sovereigns are unlikely to be sufficient and only that of the 'euro-sovereign' will suffice," he said.
Zoellick, whose five-year term at the head of the World Bank ends on June 30, added: "It is far from clear that eurozone leaders have steeled themselves for this step."
The European Commission said yesterday there is no possibility for euro zone banks to be directly recapitalised using the ESM, although that statement appeared to contradict a document released on Wednesday from the commission. But simply providing liquidity to banks is not enough, Zoellick wrote.
Leaders must also ensure that banks in turn lend that money out to prevent the corporate sector from seizing up as they did after collapse of US investment bank Lehman Brothers in 2008.
"And if banks get emergency assistance, bank executives will need to be pressed to keep providing customers with cash," Zoellick said.
In the medium term, euro zone leaders should agree on funding assurance for countries such as Spain, either through the ESM or euro zone bonds, Zoellick said. Such a move, he argued, would be in line with calls from Germany for troubled states to reduce their deficits.
The head of the International Monetary Fund Christine Lagarde denied a news report yesterday that the IMF was preparing assistance to Spain, saying the fund had received no requests for financial support from the country.
Spain's troubles mounted this week, after it revealed that its highly indebted regions faced €36 billion of debt refinancing bills this year, far more than the previously stated €8 billion.
