The dollar dropped to a record low versus the euro on Tuesday, amid worries that credit-market turmoil will result in slower economic growth and lower interest rates from the Federal Reserve.

Â

On Thursday, oil-rich Persian Gulf states said they were considering un-pegging the dollar from their currencies, a move which could further undermine confidence in the dollar. Meanwhile, the second-largest U.S. mortgage buyer, Freddie Mac reported its worst quarter ever and could cut its dividend due to further declines in the housing market.

Â

The dollar dropped 0.8 percent to $1.4789 per euro at 1:44 p.m. EST, the lowest level since the euro began trading in 1999.

The dollar rose 0.1 percent to 109.89 yen as investors turned to the yen carry trade, a type of transaction where investors buy low-yielding currencies and purchase higher yielding currencies, pocketing the difference in rates.

Â

The dollar has lost nearly 11 percent of its value against the euro this year.

Freddie mac Update