LONDON (AFP) - The dollar suffered a renewed bout of selling after US Federal Reserve chairman Alan Greenspan hinted that another depreciation in the US currency might be necessary to reduce the current account deficit.
The single European currency stood at 1.3056 dollars in late trades, against 1.2961 late on Thursday in New York.
The dollar traded for 102.89 yen against 104.20 late on Thursday.
"It seems persuasive that, given the size of the US current account deficit, a diminished appetite for adding to dollar balances must occur at some point," Greenspan told a conference on the euro in Frankfurt.
His comments pushed the dollar back towards its all-time low against the euro, which set a record on Thursday of 1.3074.
"Greenspan gives no indication that he is concerned about the fall in the dollar and appears to indicate that as long as it is orderly, there will not be a problem, keeping faith in markets to make the adjustment," noted Mitul Kotecha, senior forex strategist at CALYON.
The market`s reaction was nonetheless a bit more muted than expected.
Analysts explained that the market may be a bit reluctant to mark the dollar down much further ahead of the G20 meeting in Berlin that was to get underway on Saturday.
"But the door is open for more dollar weakness," said Audrey Childe-Freeman, an analyst at CIBC World Markets.
It wasn`t only the euro that advanced against the dollar in the wake of Greenspan`s comments, the yen was also at its strongest level since April 2000.
Though both the European Central Bank and the Bank of Japan are anxious about the speed of the appreciation of their currencies against the dollar, market intervention ahead of the G20 was not expected, analysts said.
The BoJ is no stranger to currency markets, having intervened on a regular basis over the last year to stem the yen`s appreciation.
It was a different matter for the ECB, which made its last foray into foreign exchange markets in late 2000.
At the time it acted in coordination with other G7 countries to buy euros and sell dollars after the European currency plunged to a record low of 0.8230 dollars.
Analysts said the ECB would now find it extremely difficult to stem the euro`s appreciation without US backing.
But that appeared unlikely given the views of both Greenspan and Treasury Secretary John Snow.
"Like Snow, Greenspan is showing no interest in forex intervention, suggesting once again no agreement with the ECB or BoJ," said CALYON`s Kotecha.
The markets were to keep a close eye on the G20 meeting in case the apparent divisions manifested themselves publicly.
Ministers have said foreign exchange would be prominent in the discussions, even though it does not normally play a major role at meetings of the G20, which brings together the G7 countries and major emerging economies such as China, India and Brazil.
The euro was changing hands at 1.3056 dollars from 1.2961 late on Thursday in New York, 134.54 yen (135.05), 0.7017 pounds (0.7004) and 1.5130 Swiss francs (1.5171).
The dollar stood at 102.89 yen (104.20) and 1.1589 Swiss francs (1.1705).
The pound was at 1.8603 dollars (1.8496), 191.43 yen (192.70) and 2.1566 Swiss francs (2.1653).
On the London Bullion Market, the price of an ounce of gold stood at 445.60 dollars against 442 late on Thursday.
11/19/2004 - 22:04 GMT - AFP