Dollar plunges to record low vs the Euro

NEW YORK (CNNMoney.com) -- The dollar sank to a new all-time low against the euro Tuesday as concerns about the health of the U.S. banking sector and economy deepened.

The 15-nation euro rose as high as $1.6038 in European trading, breaking through its previous high of $1.6018 set April 22. It later pulled back to $1.5992, but remained stronger against the dollar.

The greenback also fell against the Japanese yen, dropping to ¥105.18.

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Fears about the dangerously volatile mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), along with government seizure of regional mortgage lender IndyMac (IMB) on Friday, have reignited credit worries, and investors have started to focus on the plight of smaller regional banks.

The government may have demonstrated that it would support struggling mortgage finance companies Freddie Mac and Fannie Mae, and large financial institutions, but "that doesn't really do much for regional banks that are seeing their capital eroded," said Steve Malyon, currency strategist with Scotia Capital in Toronto.

Shares of Washington Mutual (WM, Fortune 500) and National City (NCC, Fortune 500) plummeted in Monday trading and later issued statements that they had enough capital to avoid the fate of IndyMac.

The weak U.S. currency has been one of the factors blamed for high prices of oil and other commodities. Crude futures held above $145 a barrel in Asian trading as investors bought oil as a hedge against inflation.