Dollar slides to an all-time low

The dollar slid to an all-time low against the euro yesterday, as negative sentiment outweighed reaction to a robust US jobs report for October.

The euro surged above $1.29 in early afternoon trade before breaching the previous record around $1.2927 hit in February. Last night, it was trading higher still at around $1.2950.

Traders were struck by the dollar's inability to sustain a robust rally fuelled by the strong US economic data.

An undertow of negative dollar sentiment driven by the US current account and budget deficits made currency investors keen to buy euros, analysts said.

The jobs report showed the number of new US jobs increased at the sharpest rate in seven months, with a gain of 337,000 non-farm payrolls jobs in October.

The number easily exceeded economists' forecasts of a rise of 169,000.

The dollar initially rallied on the news but sentiment soon turned dramatically.

"The price action today is nothing short of stunning," said Mr Richard Franulovich, senior currency strategist with Westpac Banking Corp in New York.

"Net-net, given the sharp US upward revisions to payrolls, for the euro to punch higher to fresh highs is nothing short of spectacular. I think this is a pretty good guide at just how entrenched negative sentiment is toward the dollar," he said.

Ulster Bank Financial Markets strategist Mr Niall Dunne said the strong figures could be seen in a negative light.

"As ironic as it may seem, a weak payroll would probably suit the dollar better now, because it would lead to a decline in US demand for Asian imports, helping America's trade imbalance, and hence the current account deficit," he said.

Mr John Moclair, head of domestic sales with Bank of Ireland Group Treasury, now expects the euro to test $1.30 against the dollar before long, even though the economic justification for such a move does not seem to exist.

Mr Moclair is cautious on heralding the arrival of a new period of serious dollar weakness however.

He believes that "at the back of many people's minds" will be the perception that the US economy retains momentum, a situation which could ultimately offer the dollar some relief.

"This is what we witnessed at the start of this year when the dollar recovered from similar levels."

Analysts believe that prolonged weakness in the dollar would delay any plans the European Central Bank (ECB) might have to raise interest rates in the near term.

Leaders of the some of the euro-zone's largest economies yesterday voiced concern over the latest currency moves.

German Chancellor Mr Gerhard Schröder called the strength of the euro against the dollar worrying, but added that his country's export industry was in good shape and could manage.

However, French President Mr Jacques Chirac said euro-zone exporters could be hit by the dollar's decline.