Euro continues slide against dollar

Investors continued to steer clear of the euro yesterday sending it back to levels against the dollar not seen in nearly two months.

The currency closed at $1.1338 (0.9876) after testing lows of $1.1333, as investors continued to chase growth opportunities in equities.

At its best yesterday, the currency traded at $1.1481. Its closing price was its lowest in seven weeks. In May, it reached a high of $1.1932.

The performance left Bank of Scotland economist, Mr Niall Duggan, predicting that it would hit $1.11 sooner than expected.

"We originally said that it would end the year at $1.11, but it looks like it's going to happen a lot sooner than that now," he said.

Mr Duggan said a number of factors had turned investors off the currency. "Investors are chasing growth rather than yields," he said.

"There are big opportunities for growth in US equities, despite recent predictions, and they've been switching out of euro-zone bonds and into US equities."

Mr Duggan pointed out that the Dow Jones and Nasdaq indices were up 1.75 per cent and 3 per cent respectively within three hours of opening.

He added that Japanese investors were switching from the currency to domestic stocks, drawn by the strong performance of the Nikkei index in recent months.

"The Nikkei has been touching 12-month highs," he said.

European technology and pharmaceutical stocks were also the focus of investor support yesterday.

Mr Duggan said the grim outlook for the euro-zone economy was likely to ensure that the currency would continue to slip.

Last weekend, the European monetary affairs commissioner, Mr Pedro Solbes, warned that gross domestic product (GDP) growth in the euro zone was unlikely to reach 1 per cent by the end of the year.

Mr Solbes predicted that it was more likely to come in at just 0.7 per cent.