The US dollar sank to new lows against the euro yesterday as concerns over its trade deficit, oil prices and an extremely close presidential election dented confidence in the global economy.

The US currency moved to within a cent of its all time low of $1.29 against the euro, a level that will further undermine the competitiveness of Irish exporters selling products in the US.

In early trading, the dollar reached $1.2829 against the euro as fears over the ability of the US to continue to fund its $600 billion-a-year current account deficit and a general atmosphere of risk aversion drove the dollar lower.

These concerns were augmented by the dollar breaching its year-low of $1.2135 against the Swiss franc, encouraging momentum currency investors to exploit the breach, according to foreign exchange dealers.

The subsequent sell-off took the dollar to an eight-year low of $1.1941 against the Swiss franc, a 12-year low against the Canadian dollar, a six-month low against the yen and a two-month nadir against sterling.

Dealers said a perceived lack of concern by top European policymakers about the euro's rise also was hurting the dollar.

Mr Bob Lynch, senior currency strategist at BNP Paribas in New York said the dollar's close below key technical levels against the euro and other currencies last Friday set the stage for yesterday's big losses, as overall weakness in the US currency, not just against the euro, became more apparent.

However, as trading progressed throughout the day the euro gave up most of its early gains against the dollar.

By mid-session in New York, the dollar was only 0.4 per cent weaker on the day at $1.2784 to the euro and similarly 0.4 per cent softer at $1.84 against sterling.

However, the euro's early rise to eight-month highs against the dollar will be viewed apprehensively by European and Irish exporters who trade with the US.

A stronger euro makes it more expensive for US consumers and businesses to buy European produce and undermines the cost competitiveness of exporters.

Analysts said the euro could rise further later in the week if the European Central Bank (ECB) did not intervene.

"If there are no obstacles from central bankers, the euro will continue to strengthen. So if [ ECB president Mr Jean-Claude] Trichet doesn't say anything about the the euro's rise, it will continue to rise," said Mr Joe Francomano, vice-president at Erste Bank in New York.