LONDON (AFP) - The dollar sank to a new all-time nadir against the euro and to a seven-month trough below 105 yen as markets remained concerned by the large US current account and budget deficits.
The single European currency rose to as high as 1.3036 dollars in early European trading Wednesday, exceeding a previous all-time time summit of 1.3005 dollars scaled last week.
The euro later eased back slightly to 1.3032 dollars against 1.2953 late on Tuesday in New York.
Against the yen, the dollar fell to 104.67 from 105.35 on Tuesday.
Dealers are worried about how the United States will attract the necessary capital inflows to fund the deteriorating trade balance and budget deficit. The fear is that overseas investors might lose confidence in the debt-ridden US economy, placing their money elsewhere.
"It's just the continuation of the strong downward trend of the dollar with a slight move of emphasis away from Europe to Asia, with dollar-yen moving lower," HBOS analyst Steven Pearson said, explaining the decline.
"There was a fairly determined defence of the 1.30 dollars barrier, which was slowing the euro's progress against the dollar," he added.
US Treasury Secretary John Snow again reaffirmed his strong dollar policy, saying that currency devaluation was no way to achieve economic prosperity.
Speaking to reporters after a keynote speech in London, Snow also stuck to his well-worn message that while markets should set exchange rates, Washington is not seeking to weaken its currency.
"No one has ever devalued their way to prosperity," he said.
And he dismissed speculation of possible central bank intervention to slow the decline of the dollar, which sank to a new record low of 1.3036 per euro in early European trading Wednesday.
"The history of efforts to impose non-market solutions is at best unrewarding and chequered," Snow said.
Asked why the United States continues to support in public a strong dollar policy, he replied: "Because it's our policy."
Fears of Japanese intervention provided some support for the dollar in Asian trading, before dealers drove the US currency below the 105 yen level, testing the pain threshold of the Japanese authorities.
"The caution about intervention is very strong," said Hideyuki Tsukamoto, foreign exchange manager at Mizuho Bank said in Tokyo.
"As one benchmark, people are watching for intervention at around the 105 yen level," he said, before the dollar sank below the key level.
The euro was changing hands at 1.3032 dollars from 1.2953 late on Tuesday in New York, 136.35 yen (136.48), 0.7014 pounds (0.6989) and 1.5192 Swiss francs (1.5229).
The dollar stood at 104.67 yen (105.35) and 1.1657 Swiss francs (1.1759).
The pound was at 1.8581 dollars (1.8527), 194.51 yen (195.21) and 2.1664 Swiss francs (2.1784).
On the London Bullion Market, the price of an ounce of gold stood at 444.60 dollars against 439.40 late on Monday.
11/17/2004 - 12:33 GMT - AFP