In late trading in Tokyo the euro had fallen to $1.0303, below the record low set on Wednesday of $1.0330.

During the day, the euro gained as much as half a cent, but when trading ended in London, the world's largest currency market, one euro bought just $1.0327 and £0.6431.

The fresh fall came as expectations grew that European central bankers would not step in to halt its slide.

European Central Bank president Wim Duisenburg insisted on Wednesday there was scope for the euro to rise.

ECB president Wim Duisenberg is struggling to regain the markets' confidence in the euro

He said the currency's persistent weakness was a direct consequence of economic divergence between the stagnating European economy and the US powerhouse.

He added: "In the long run, I see more factors pointing at an appreciation of the euro than at a depreciation of the euro."

However, the president of the Germany Bundesbank, Hans Tietmeyer, acknowledged that "the decline in the euro's external value over the last few days has not been good news".

He said the ECB would "study developments carefully".

Some currency traders still predict that the euro could soon be on par with the US dollar. This could trigger a nasty crisis of confidence in the currency.

Market intervention

At the start of the week there had been market rumours that the ECB might intervene on the markets in an attempt to boost the euro.

This stopped the slide of the currency for two days, but analysts are now convinced that the bank will refrain from a currency intervention.

On Tuesday, a senior Bundesbank official had suggested that interest rates for the eurozone may have to rise, if the single currency continues to be weak on the markets.

Edgar Meister, member of the German central bank's directorate, said a rate hike could strengthen investors' confidence.

However, he stressed that he was not forecasting that rates would rise in the coming months.

Weak euro = bad euro?

The euro's weakness sits uneasy with confident predictions by EU politicians that the euro would be a strong currency that could rival the US dollar.

Economists Trevor Williams (Lloyds TSB) and Kate Barker (CBI) discuss the implications of the Euro's slide

For the eurozone's exporters, though, the weakness is a boon, making their products cheap and attractive for the world markets.

Europe's largest economy, Germany, is flagging and urgently needs a boost for its export industry.

UK exporters are suffering from the strong pound and would dearly love to see the currency appreciate.

Economic growth is the key to the euro's fortunes, though. Europe's big economies are flagging, hurting government revenues and threatening targets to reduce public deficits.

In contrast, the US economy is going from strength to strength. This boosts the US dollar - and the pound, which tends to mirror the dollar's market movements.

Talking up the euro

The EU's Romano Prodi believes the euro's decline is not worrying

Meanwhile, attempts to talk up the euro continue, although the markets take less and less notice.

At a summit meeting of European leaders in Cologne, the German Chancellor Gerhard Schröder said on Thursday that "the stability of money is a condition for growth, and growth is a condition for having a sustainably stable currency".

However, the summit is not expected to issue a formal statement on the euro's travails.