The euro dropped to a fresh three-week low below $1.4250 against the dollar on Wednesday, as investors unwound risky trades in commodities and other higher-yielding currencies and bought back the greenback in a flight to quality bid.

Traders also took out an option barrier said to be at the $1.4250 level.

The euro hit a session low at $1.4204 on trading platform EBS

"There has been considerable real money selling in the euro and Aussie against the dollar. Breaking the $1.4250 level was important and there are stops below there," said Douglas Borthwick, managing director at Faros Trading in Stamford, Connecticut.

"The real money investors, however, tend to start selling when the market edges close to a bottom and that is where we think the market is."