The euro fell below 90 US cents yesterday as concerns about the slowdown in European growth rates continued to undermine the currency.
The euro closed at 89 cents against the dollar on the foreign exchange markets as the US currency enjoyed a strong performance, with some analysts now fearful that it may get stuck in a lower trading range for some time.
The euro has been trading at between 90 and 95 US cents but this could worsen, forcing the currency into weaker territory of between 85 and 90 cents against the dollar. Any further weakness in the euro will add to inflationary pressures across the euro zone.
The currency has slumped after the European Central Bank failed to cut interest rates this week. Bank of Ireland chief economist Dr Dan McLaughlin said a rate cut would boost the currency but warned there was a real risk that the euro could remain weak now that the European economy was slowing quite significantly.
The pound was unchanged against sterling yesterday at 79p but was weaker against the dollar at $1.13.
The dollar shrugged off another record current account deficit and mounting Wall Street losses this week and analysts expect the currency's strength to continue.
But even in the middle of a severe US economic slowdown and US stocks at the forefront of a global equity blood bath, international investors show no signs of giving up their faith that the US economy's longer-term prospects will be better than anywhere else in the world.
--(additional reporting by Reuters)
