Euro tests new lows

The euro does not present a pretty picture for currency traders

Europe's single currency, the euro, has sunk to a new life-time low against the US dollar, and dropped more than 1% against sterling.

The euro's latest plunge came after a survey of German firms showed that business confidence was weaker than financial markets had expected, falling for the third month in a row.

On London's currency market, one euro bought as little as $0.8444, and just £0.5982 - its lowest level against sterling since mid-August.

The International Monetary Fund, meanwhile, repeated its verdict that the euro was "massively undervalued" and hinted that its economists thought now was the time to act and intervene on the currency markets.

The IMF's new managing director, Horst Köhler, said the subject of intervention should not be "taboo".

He said that the IMF had to pay attention to exchange rates and should not be afraid to speak its mind.

On Tuesday, eurozone officials had chided the IMF's chief economist Michael Mussa for suggesting an intervention.

Portugal's central bank governor Vitor Constancio said the comments by Mr Mussa were "inappropriate and which somebody in his position would not normally make".

Mr Mussa had warned that the euro's continued weakness could pose a big threat to the world economy.