LONDON (AFP) - The dollar remained mired at more than eight-month lows against the euro and six-month lows against the yen, as oil prices spiked ever higher and investors continued to fret about the US' record high current account deficit.
The single European currency jumped to 1.2778 dollars in late afternoon trading from 1.2680 late on Friday in New York.
The dollar skidded to 106.64 yen from 107.20 on Friday.
The euro earlier had climbed to 1.2829 dollars, breaching the 1.28 dollar level for the first time for eight months. Its record peak is 1.2929 reached on February 18.
Jitters ahead of next week's US presidential election and a weak opening on Wall Street provided further excuses for investors to sell the US currency.
"The US is suffering from the Japan syndrome of a few years ago, where anything out of the market is seen as negative and taken as an excuse to sell the dollar," said Standard Chartered foreign exchange strategist Marios Maratheftis.
Since the end of last week, the market has been focusing on concerns over the huge current account and budget deficits in the United States, and the need for the dollar to go lower, he said.
While US Federal Reserve officials have begun expressing concern about the deficits and saying the dollar needs to move lower, European Central Bank officials have been saying they are comfortable with the euro at its current level, he noted.
Although there were market rumours about possible intervention by the Japanese central bank, Japan was more likely to be concerned about the speed of the dollar's fall, Maratheftis added. Any intervention will therefore be to stem the rate of decline rather than halt it altogether.
Investors were also awaiting a speech later Monday by European Central Bank governor Jean-Claude Trichet for any comments on the oil price and on currency rates, although he was not expected to express any undue concern over the euro's rise at this stage.
Meanwhile, the pound remained strong against the dollar, but continued to weaken against the euro after the latest Hometrack survey provided further evidence that higher interest rates were taking their toll on the British housing market.
It was now seen as a virtual certainty that there would be no further interest rate hikes this year, and that the next move by the Bank of England may well be to lower them.
Bank of England official Richard Lambert's speech Monday afternoon was also somewhat dovish, with comments that economic growth in the third and fourth quarters of this year were unlikely to match the very strong performance of the second.
The euro was changing hands at 1.2778 dollars from 1.2680 late on Friday in New York, 136.24 yen (135.97), 0.6946 pounds (0.6935) and 1.5321 Swiss francs (1.5355).
The dollar stood at 106.64 yen (107.20) and 1.1990 Swiss francs (1.2105).
The pound was at 1.8399 dollars (1.8277), 196.17 yen (195.92) and 2.2067 Swiss francs (2.2122).
On the London Bullion Market, the price of an ounce of gold stood at 429.15 dollars against 422.80 on Friday.
10/25/2004 - 19:21 GMT - AFP