The euro failed to reach parity against the dollar today contrary to earlier predictions. It came off its earlier highs in late trade, hovering below $0.99, as investors took profits, dealers said.
Expectations that the single currency would reach parity against the dollar by the end of the day faded after it failed to rise on Wall Street's sharply lower opening.
Earlier, the euro edged towards $0.9950, its highest level since February 2000. Dealers said the dollar's weakness has reinforced the view that the US Federal Open Market Committee's announcement tonight will confirm interest rates on hold.
They noted comments by European Central Bank chief economist Mr Otmar Issing that the firmer euro is good for inflation and that the bank will monitor exchange rate developments.
Earlier the euro stormed as far as $0.9941, up 1.5 per cent on the day following US telecoms giant WorldCom's admission that it had inflated its profits.
German Finance Minister Mr Hans Eichel welcomed the latest rise in the euro, repeating a stronger currency should help keep European Central Bank interest rates low.
"A stronger external value for the euro brings us the advantage that we import less inflation," Mr Eichel told reporters at a meeting with his Polish opposite number.
He repeated he preferred inflation pressures and interest rates to be low rather than the contrary.
Dealers said further dollar losses seemed likely as futures markets were pointing to a bloodbath on Wall Street.
The dollar also fell to seven-month lows against the yen despite repeated heavy selling of its own currency by the Bank of Japan.
"It's WorldCom, I don't think the stock market needed any more bad news, we'd already had Fedex and Quantum reporting very bad earnings," said Mr Neil Parker, market strategist at RBS Financial Markets.
The dollar was also down more than a per cent against sterling and the Swiss franc. The US administration so far appeared unconcerned with the dollar's slide and dealers took that as a further reason to sell the greenback.
Dealers said they were alert to the possibility that the Bank of Japan could buy dollars again as Tokyo remains concerned that yen strength was hurting its exporters. It also intervened earlier this week.