European currency hits new high against US dollar

The European currency hit a new record high against the U.S. dollar Friday amid speculation of ongoing American credit crisis and a possible rate cut from Washington.

Photo: European currency hits new high against US dollar

European currency hits new high against US dollar

The shared 13-nation currency spiked early to hit US$1.4966, breaking the previous record of US$1.4873, set the day before.

In morning European trading, the euro had retreated slightly to US$1.4924, still up from the US$1.4833 it bought late in Europe the day before.

The dollar fell to purchase 107.68 Japanese yen, dropping below the 108-yen level for the first time since 2005, down from 108.62 yen late in Europe on Thursday.

The British pound, meanwhile, rose to US$2.0716, up from US$2.0634 the day before.

The U.S. Thanksgiving holiday weekend kept many players on the sidelines, while Japanese financial markets were closed Friday for the Labor Thanksgiving Day holiday.

The euro, the pound and other currencies have been climbing steadily against the dollar since August amid fears for the health of the U.S. economy, stoked by the subprime credit crisis.

The dollar has been further weakened by U.S. interest-rate cuts, which can be used to jump-start an economy, but can also weaken a currency as investors transfer funds to countries where they can earn higher returns.

The Federal Reserve has already cut rates twice and speculation is growing that as the subprime fallout continues, it will be forced into another cut.

The euro has been hitting new highs daily for the past week, and has started to raise concern among European businesses and governments.

German Chancellor Angela Merkel told N24 television on Thursday that the strong euro and high oil prices pose a risk to the country's economy _ Europe's largest.

"We are pleased that Europe has a strong currency, but this obviously also creates problems for exports," she said.

Meanwhile, Airbus CEO Thomas Enders said the euro has now "crossed the pain threshold" and that the rate of the dollar's fall "hardly leaves room for reasonable adapting."

"That is life threatening," he was quoted by Der Spiegel magazine as telling the company's work's council in Hamburg on Thursday.

Although the company is expecting a record number of orders, it still must reckon with "tremendous losses," he said.