NEW YORK (Bloomberg) - The dollar fell to its lowest level in almost 14 months against the currencies of six major US trading partners as signs of global economic recovery spurred demand for riskier assets.

The euro strengthened versus the dollar after European Central Bank (ECB) President Jean-Claude Trichet said the region's economy is emerging from a period of "free fall". Australia's currency was the biggest winner against the greenback among the 16 most-traded counterparts tracked by Bloomberg on speculation investors favored higher yields.

"You have an increased capacity for risk," said Thanos Papasavvas, who helps oversee $4 billion as head of currency management at Investec Asset Management Ltd. in London. "There is a move out of dollars into markets which offer better returns."

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, dropped 0.7 percent to 75.964 at 4.19 p.m. in New York, after reaching 75.767, the weakest level since August 2008.

Trichet signaled the ECB will keep interest rates at a record low to spur growth as the euro's six percent rally this year against the dollar threatens to undermine the recovery from Europe's worst recession since World War II.

"The current rates remain appropriate," Trichet said at a press conference in Venice after policy makers left the main refinancing rate at one percent. "Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability," he said, reiterating the Group of Seven's (G7) statement on currencies.

The dollar depreciated 0.6 percent to $1.4778 per euro, from $1.4691 yesterday. It earlier reached $1.4818, within a half-cent of $1.4844, a level touched on September 23 and the weakest since September 2008. The euro rose 0.4 percent to 130.73 yen, from 130.18. The dollar slid 0.2 percent to 88.46 yen, from 88.61.

The greenback extended its decline even as policy makers called over the past week for strength in the world's main reserve currency.