The euro set a record high against the dollar for the fifth session in a row yesterday and tested last year's lifetime high against the yen as investors' bearish views of the US currency dominated markets.
The euro also hit a near 15-month peak against sterling, as British housing data showed a sharp decline in mortgage approvals for last month.
The single currency climbed by more than 0.5 per cent against sterling to trade at 71p sterling, its highest level since October 2003.
Dealers said trading volumes were thin in the holiday period between Christmas and New Year in all markets.
In dollar trade, investors' continued to focus on the burden of the US current account deficit on the dollar and about the ability of the US economy to attract enough money to plug this shortfall.
Global investors' worries about the US current account deficit have depressed the dollar by about 4 per cent against the yen and 8 per cent versus the euro and sterling so far this year.
Many analysts predict further losses.
"The euro has been strong for a few days now. It is a repeat of late-2002 and late-2003," according to Mr Trevor Dinmore, foreign exchange strategist at Deutsche Bank in London.
"When you have low liquidity at the end of the year, you have fewer flows and you see more dollar weakness."
The euro gained about 0.25 per cent against the dollar in early trade to hit a record high of $1.3646.
There was some respite for the beleaguered US currency as the day progressed, although analysts said the positive move was only a corrective rebound.
The euro's new high against the dollar had simply provided dealers with more attractive levels to sell and lock in profits, they said. Fundamentals still point towards dollar weakness. they added.
"This is just profit-taking," said Mr Greg Anderson, senior currency strategist at ABN Amro in Chicago.
"There was no event trigger at all. People had a good trade [ on selling dollars] either side of Christmas and now it's just coming off."
Even though London was open, liquidity was still very thin, making the market more vulnerable to sharp price swings.
As European trade was finishing for the day, the euro was trading at 70.8p sterling and $1.2574.
Reuters
