The dollar surged broadly Wednesday with the euro sinking to a 1-year low as the debt crisis in Europe intensified.

On Wednesday, credit ratings agency Standard & Poor's downgraded Spain's debt a day after cutting ratings of Greece and Portugal.

Budget deficits in several European countries and fears of prospective debt defaults have dragged down the euro from a level above $1.51 in early November.

"Agencies are on the warpath and unlikely to relent anytime soon," said Brown Brothers Harriman analyst Win Thin, who expects more downgrades of European debt to continue to weigh on the euro. "The problems facing these peripheral countries are nothing new, and these problems are also not likely to be solved over the near-term."

In afternoon trading in New York, the euro sank as low as $1.3116, its weakest point since April 2009, before edging back up to $1.3152. On Tuesday, it was worth $1.3184.

The head of the International Monetary Fund also refused to confirm reports Wednesday of a bigger bailout package for Greece between euro100 billion and euro120 billion over the next three years, as negotiations in Athens are still ongoing.

Analysts have said the current deal for euro45 billion, or nearly $60 billion, in aid, which Germany's parliament must still approve, will not be enough to contain Greece's swelling debts amid surging borrowing costs.

"It's a crisis of confidence," said Joseph Trevisani, chief market analyst at FXSolutions. As information about the depth of debt problems in Europe keeps getting worse and the plan to deal with it keeps changing, markets are sending borrowing costs surging for other heavily-indebted European countries such as Portugal.

"This is the first test the (European monetary union) has faced and they're not doing a good job with it. The structure they have is insufficient," Trevisani said.

An actual default in Europe could also infect market sentiment for other advanced economies with heavy debt loads, making it more expensive for them to borrow.

"The contagion from a Greek default could also spread to much larger economies where the public finances are also fragile, including the U.K. and, perhaps the biggest risk of all, Japan," said Julian Jessop, chief international economist at Capital Economis in London, in a research note.

In other afternoon trading, the British pound fell to $1.5164 from $1.5258. The dollar rose to 94.08 Japanese yen from 93.15 yen, gained to 1.0892 Swiss francs from 1.0858 francs and rose to 1.0121 Canadian dollars from 98.47 Canadian cents.

An index tracking the dollar against six other currencies was up 0.7 percent.