LONDON (AFP) - The euro rocketed up to a new record high against the dollar as markets grew increasingly worried about the ballooning trade and budget deficits in the United States.
The single European currency rose to as high as 1.2952 dollars, smashing a previous all-time summit of 1.2929 dollars reached on February 18.
In late European trading the euro stood at 1.2942 dollars, against 1.2874 late on Thursday in New York.
Dealers were fretting about the economic implications of the electoral win of US President George W. Bush, analysts said.
"It`s the same story we`ve had since the election result was made clear," said Chris Furness, currency strategist at the 4Cast economic consultancy firm.
"That is that the politics are not going to change now in US and geopolitical temperatures are not going to be reduced very much, and may even go higher.
"On the economic front we may well get growth, but we will get growth at the cost of higher deficits, certainly the trade deficit at least," said Furness, adding that the euro could hit 1.40 dollars within the next year.
Last month, Washington announced a record 2004 budget deficit of 413 billion dollars, while the trade deficit in August rose to 54 billion dollars, the second largest ever.
Dealers are worried about how the United States will attract the necessary capital inflows to fund the deteriorating trade balance.
"The dollar is not a currency in fashion at the moment because of the structural factors which underline the imbalances in the US economy," said Audrey Childe-Freeman, economist at Canadian Imperial Bank of Commerce.
The dollar had rebounded briefly against the euro earlier Friday on news that the US labour market created a seven-month record of 337,000 new jobs last month.
Employment growth in October exploded from the 139,000 jobs created in the previous month. It also smashed past Wall Street economists` consensus forecast for a gain of 175,000.
But investment funds saw the dollar rebound as an opportunity to sell the US currency for euros, while central banks in the Middle East and Asia were also active, said Furness.
"After the payrolls in came the central banks again. Reserve adjustment has certainly got to be part of the plan at the moment," he said.
11/06/2004 - 00:46 GMT - AFP