The dollar is nearing its all-time low against the euro because the fact that the losses at Fannie Mae and Freddie Mac may get deeper although policy makers said the two government-sponsored enterprises won’t be subjected to a government takeover, a measure that would make the firm’s stock worthless.

The dollar recorded its third weekly decline in four weeks after President George W. Bush, Treasury Secretary Henry Paulson and Senate Banking Committee Chairman Christopher Dodd hinted yesterday that a government takeover of the nation’s largest mortgage-finance companies isn’t totally out of the question.

The currency dropped against the yen and reached a 25-year low against the Australian dollar, while crude oil also set a new record as it climbed above $147 a barrel.

Risk aversion is causing the dollar to drop on the background of the concern surrounding Fannie and Freddie. The situation is causing a lot of dollar-negative sentiment in the market.

"The dollar cracked given the concern Fannie and Freddie are under heavy pressure. It's only a matter of time that the government either takes over or backstops them. It's going to put a lot of liability on the U.S. government,'' said Brian Dolan, chief currency strategist at FOREX.com, Bloomberg reported.

The U.S. dollar fell 0.5 percent to 106.28 yen, from 106.80 on July 4. The yen fell 1 percent to 169.46 per euro, from 167.73, after touching 169.63, the highest since the European Union introduced the new currency in 1999.

The Australian dollar climbed 0.3 percent from a week earlier after touching 97.18 U.S. cents yesterday, the strongest level since 1983.