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Bruised euro hangs at life lows vs dlr, stg

NEW YORK: The euro tumbled to uncharted lows against the dollar and British pound on Thursday, convincingly sliding below one dollar, as Europe's single currency succumbed to doubts over regional economic prospects.

After struggling around the $1.0000 level all week, the euro dropped to a record low of 98.69 cents in several waves of selling. Dealers who had loaded up on euros in hopes the currency would strengthen continued to bail out of their long positions as more strong US data highlighted America's nine-year economic boom.

The euro stemmed its declines late in the morning and, as Thursday's session wound down, it hung near 98.80 cents, more than 1-1/4 percent below its Wednesday New York close.

Since its launch just over a year ago, the euro has lost more than 16 percent in value.

The single currency also dropped to a lifetime trough against sterling at 60.27 pence and fell to three- week lows against the yen, helping the Japanese currency to rise around half a percent against the dollar.

Meanwhile, the Swiss franc sagged to 10 year lows in the euro's wake and, in late trading, it was down more than 1-1/4 percent since the close of trading on Wednesday.

"It's more a question of why the euro's fall took so long, rather than what the trigger was today," said Paul Podolsky, currency strategist at FleetBoston. "We were over parity and the market was caught in the headlights by that for a long time."

"There is a lack of faith in European policy and huge interest rate and growth differentials," between Europe and the United States, Podolsky said.

An apparent absence of any official concern about its weakness accelerated the euro's decline, but dealers remained somewhat puzzled why they were able to push the euro so much lower on Thursday, having failed to break new ground earlier.

"The rumour was that (European) central banks were supposed to defend $0.9905. They didn't," said Charles Spratt, senior foreign exchange manager at Brown Brothers Harriman in New York.

"Maybe they want a weak currency and they don't want to tell us," he said.

Later remarks by Bundesbank council member Franz-Christoph Zeitler that a strong euro is in Europe's interest did little to pull the currency off its lows.

Traders said the market seized on the fact that Group of Seven wealthy nations did not express concern at the euro's weakness at a summit last weekend as a signal to sell euros.

ECB Chief Economist Otmar Issing said on Wednesday the euro's exchange rate was not itself a target of the central bank's policy.

Spratt said players who opened long euro positions at the start of the year anticipating European growth to pick up and the red-hot US economy to cool were either out of the market "or in a lot of pain."

News that orders for US manufactured goods shot up an unexpected 4.1 percent in December, the strongest rate in five months, sparked new reasons to buy dollars.

"This is really US dollar strength at its finest," said Greg Schwake, trader at Commerzbank in New York.

The euro's plunge sent currency analysts looking to older charts to look for technical benchmarks.

In dollar/mark terms, the dollar rose to 1.9806 marks, its highest point in more than 10 years. Technical analysts said the psychological 2.0000 mark level -- equivalent to 97.80 cents in euro/dollar terms -- provided a key downside target.

Traders said the main focus now for euro/dollar was on how aggressive the US Federal Reserve's future policy could be following next week's anticipated rate hike, adding the market would keep a close eye on Friday's US employment cost index and gross domestic product data.-Reuters