The euro sagged to its lowest foreign-exchange rate since July 2012 on Tuesday, the last day of official trading for this year on the Frankfurt financial markets, dpa reported.
A mid-morning brush with 1.2124 dollars before it rallied slightly underlined traders' expectations that the European Central Bank (ECB) will start the new year with more monetary easing to fight deflation and revive a near moribund eurozone economy.
The ECB set a euro reference rate for the day of 1.2160 dollars.
The prospect of an election in Greece - in which a leftist government could take over and pursue Greece's exit from the eurozone - also made markets sceptical about the common currency's outlook.
Another factor hitting the euro was Spain's biggest fall in retail prices since 2009. December data showed Spanish prices down 1.1 per cent from a year earlier. Growth in the eurozone is largely limited to northern countries led by Germany, and even that is weak.