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Last Updated: Wednesday, 18 February, 2004, 22:17 GMT
Dollar rallies after hitting lows
Dollar bills
The dollar has fallen yet again
The US dollar revived in late New York trading after dropping to a new record low against the euro and also slipping against other world currencies.

In early trading on Wednesday, one euro rose above $1.29 for the first time in its five-year history, before dropping back in US trading to $1.268.

The UK pound also traded at $1.914 - a fresh 11-year high, before dropping down 1% on the day to $1.8841.

The dollar has fallen in recent months, hitting European exporters.

The recent dramatic fall in the US dollar may be bad news for UK exporters but can only bring joy to British shoppers stateside

Earlier in the day, French President Jacques Chirac, speaking in a television interview in Berlin, said Europe needs stable exchange rates but the region seems to be bearing the brunt of the currency markets' volatility.

His comments followed a statement by German economy minister Wolfgang Clement that he has a euro level in mind at which the ECB should halt the single European currency's rise against the dollar.

The euro had risen as high as $1.292 at one point, beating a month-old record of $1.2898, before falling back.

Since hitting its previous peak on 12 January the European currency has hovered within a few cents of its all-time high amid persistent concerns over the giant US trade and budget deficit.

Australian and New Zealand dollars also reached seven-year highs against the US currency.

Nick Parsons, an economist at Commerzbank, said he did not think the Bank of England was yet concerned about the increasingly high value of the pound against the dollar.

"The Bank of England is doing nothing to suggest it is unhappy with the high value of sterling," he said.


US economic growth has been outpacing the global average, with its consumers pulling in ever more imports.

This has resulted in giant trade and current account deficits for the US Government.

And while global goods and services have flowed into the US, cash has poured out, producing a constant pressure on the value of the greenback.

The historically low US interest rates have also done little to lure the international flows of capital that govern exchange rates.

Yet it also appears that Washington's once-ironclad commitment to a strong dollar seems to have waned, perhaps because the US Government realise that America stands to gain from having a weaker currency.

With imports becoming more expensive for consumers and exports cheaper for foreign buyers, it gives a boost to America's factories.

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