The euro hit an 11-year low against the dollar on Friday as financial markets continued to digest the effects of the European Central Bank’s unprecedented €1.1tn quantitative easing stimulus package.

Analysts said the euro, which has dived 7% since the start of the year, was on track for its biggest monthly fall against the dollar since the depths of the financial crisis in early 2009, and predicted that the single currency could yet reach unseen lows.

One analyst said: “We are in an avalanche of euro selling,” while another remarked that the flight of funds out of the eurozone was strong enough for parity with the dollar to be a possibility.

Philip Shaw, chief economist at Investec, said: “Clearly, there is a much greater chance that the euro hits parity with the US dollar once again, as it first did in 1999.”

Stock markets climbed and bond yields fell as the markets digested the full implications of the massive QE project that will involve the ECB buying €60bn (£45bn) of bonds a month until September 2016 or when eurozone inflation nears the central bank’s 2% target.

The euro lost more than 2% against the dollar and fell below $1.12 to $1.11 for the first time since September 2003. The euro also hit a 16-month trough against the yen at 130.91 yen, and the euro was worth just 75p – sterling’s strongest level for seven years.

Manufacturers across the eurozone cheered the weakening of the euro, noting that it would make exports more competitive. Carmakers were among the biggest gainers, with BMW shares up nearly 5% to hit a record high and Peugeot Citroën rising 3.7%.

British holidaymakers will also receive a huge boost. Travel regulator Abta said bookings for the summer were already up following a near 20% fall in the euro’s value over the last seven months.

But the erosion of euro savings is expected to anger older voters in Germany, Finland, Belgium and the Netherlands. Some politicians have already warned that the ECB’s move, which cheered beleaguered southern European governments with large debts and high unemployment, will increase costs for German holidaymakers heading for popular destinations in the Caribbean and far east.

Shaw said: “2015 has opened with an astonishing number of event shocks and market volatility. These include further declines in oil prices, surprise rate cuts by various central banks, the lifting of the Swiss National Bank’s franc cap against the euro, and the unveiling of the ECB’s substantial QE programme. One consequence has been the speed of the depreciation of the euro.”

British government borrowing was another beneficiary after UK bond yields hit new record lows. Thirty-year gilt yields led the move downwards and hit a record low of 2.13%. Eurozone government bond yields fell, cutting the cost of government borrowing. Italian and Spanish 10-year yields also fell to record lows.

“It’s a massive contagion effect,” said Marc Ostwald, fixed income strategist at ADM Investor Services International. “No person in their right mind would buy G7 bonds at these levels. Everything is done on the basis of relative value, so if there is a big flattening in the eurozone, it has an impact for gilts.”

Europe’s stock exchanges soared on Friday following the ECB’s move. The FTSE 100 advanced for a seventh straight day on Friday, putting it on course for its biggest weekly gain in more than three years.

But Greek shares led continental stock markets higher after ECB president Mario Draghi said the bank could buy Greek debt as part of the €1.1tn package.

The bond-buying scheme helped Greece’s ATG share index rise 5.2%, with Attica Bank, National Bank of Greece and Piraeus Bank up between 11.6% and 8.8%.

Traders also saw a greater chance that Syriza, the anti-bailout party in Greece, currently leading in the polls, would reach a compromise with the country’s official lenders if they came into power.

Daiwa economist Robert Kuenzel said: “With Greece having most to lose if it left the euro, we suspect Syriza’s bark will be worse than its eventual bite.”

Greece will be eligible for the ECB bond-buying programme but subject to stricter conditions because of its European Union/International Monetary Fund bailout programme.

The FTSE 100 index was up 36 points, with the prospect of a major deal in the telecoms sector driving the index.

Some analysts had previously warned that QE in the eurozone was a double-edged sword for the UK. On the one hand it could improve economic activity, benefiting UK exports, but the falling value of the euro would make those exports more expensive, possibly excluding British manufacturers from the improving situation.