Euro bursts through dollar barrier

EUROPE'S single currency smashed the key one-to-one level against the dollar today as nervous investors continued to dump US assets on concern about America's limp economic recovery and accounting irregularities at high-profile US companies.

The euro burst through parity early this afternoon as US stock futures gave up early gains.

It was the first time one euro has been worth more than one dollar since February 2000 and brought the single currency's gains since the start of the year to more than 12%. It continued to climb after reaching the milestone, hitting a high of $1.0035. Against sterling, it rose as far as 64.15p.

Nick Parsons, chief currency analyst at Commerzbank, said: 'I think it will consolidate around this level until the end of the week, with $1.0090 a big area of technical resistance.'

He expected more pressure on the greenback. 'At the moment, US stocks are dragging down the dollar. The danger will be if the dollar starts to drag down stocks. Then we risk getting into a vicious spiral that gets horribly out of control.'

The European Central Bank declined to comment on the euro's achievement. However, ECB vice president Lucas Papademos last week issued a joint statement with eurozone finance ministers and the European Commission, welcoming its recent climb.

Although a stronger euro could hamper eurozone economic growth because it makes the region's exports more expensive, analysts said it would give a much-needed boost to the credibility of the ECB and the currency.

The euro began life in January 1999 at $1.1747. It first fell below $1 in December of that year, sinking even lower in 2000. It hit a trough of 82.25 cents in October 2000 before turning a corner the following month after co-ordinated intervention by G7 central banks to push it higher.