The euro slumped to its lowest since January on Tuesday, as early gains fizzled due to lingering concerns about Europe's sovereign debt crisis.
Traders shrugged of positive economic news from Germany, ahead of this afternoon's interest rate announcement from the U.S. Federal Reserve.
While no change to the Fed's benchmark interest rate is expected, markets will be looking to see whether policy makers plant the seeds of a third round of quantitative easing in 2012.
The euro slumped to $1.3120 versus the dollar, having lost 10 cents since late October.
The euro extended its 10-month lows versus the sterling, dropping to GBP 0.8440.
Driven by a slower increase in food prices, U.K. inflation eased further in November amid weak economic activity, data from the Office for National Statistics showed Tuesday.
Annual inflation came in at 4.8 percent, as expected, the lowest since August.
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