After taking a two-year pounding, the euro flexed its new muscles yesterday and rallied against the dollar and yen as cracks appeared in the US and Japanese economies.
The single European currency climbed to $0.8747 in late trade from $0.8724 in New York on Thursday after reaching a two-month high of $0.8785.
It advanced to 97.23 yen from 96.27 yen in New York but fell back against sterling from 61.16p on Thursday to 60.91p yesterday. The dollar also rose against the Japanese currency, to 111.15 yen from 110.33 yen in New York.
"The US dollar has weakened against pretty much all currencies apart from the yen, which has suffered from a political crisis in Japan," Standard Chartered economist Ms Rozia Khan said.
"It's the first time that the euro has gained significantly on the US economic slowdown and not only on intervention fears," she said.
Investors were beginning to remove their money from the United States as each of set of new US data indicated that the pace of the US economic powerhouse was moderating.
The latest snapshot of business confidence from the Chicago Purchasing Managers' index released on Thursday was markedly weaker than had been expected, analysts said.
The National Association of Purchasing Management said its overall index fell to 47.7 points in November from 48.3 in October as the manufacturing sector softened for the fourth consecutive month.
The storm whipped up on Wall Street in recent weeks has done little to calm investor sentiment towards US assets, which have taken a pounding on the equity markets of late.
"The underlying support for the euro has remained the weakness of the US economy and equity markets, and we expect this to continue," said Chase Manhattan economist Mr Adrian Schmidt. The Nasdaq Composite has seen its value almost halve since its peak in March as technology issues continue to suffer.
