Dollar at a new low against euro

NEW YORK -- The dollar fell to a record low yesterday against the euro, which spiked at 1.3640 as the dollar's slide continued in thin, post-Christmas trading.

In late New York trading, the euro eased slightly to $1.3620 -- above the previous high of $1.3548 set Friday and more than a cent higher than Thursday's late New York rate of $1.3493.

US trading was largely curtailed Friday, ahead of the Christmas holiday.

The sharp rise in the euro was helped by yesterday's low liquidity, which was about half of that on a normal day, said Chris Callander, a senior foreign exchange analyst at CMC Group in New York. Also, traders were encouraged by talk that the euro could hit $1.50 or $1.60 by the end of 2005, he said. But with market movements so exaggerated due to low volumes, he does not expect the euro to climb rapidly for much longer.

The dollar weakened across the board yesterday: The British pound was quoted at $1.9335 in late New York trading, up from $1.9201 late Thursday. The dollar bought 103.10 yen, down from 103.70; 1.2193 Canadian dollars, down from 1.2334; and 1.1356 Swiss francs, down from 1.1440.

The dollar has fallen steadily against the euro and other major currencies in recent weeks on worries over the large US trade and budget deficits -- factors that can undermine a country's currency.

Though Washington professes a ''strong dollar" policy, many observers believe the US government is content to see the dollar fall because it makes US exports cheaper and can help export-dependent sectors of the economy.

It's feared the stronger euro could hurt Europe by making its exports more expensive. But it helps cool inflation by making imports -- particularly oil, which is priced in dollars -- cheaper.

Other consequences include higher costs of living for Americans abroad. The US military has given troops in Europe a 31 percent increase in their cost-of-living adjustments to help make up for the diminished purchasing power of their salaries.