Euro hits new low on six-month anniversary

THE EURO plunged to a new lifetime low against the dollar yesterday, marring its six month anniversary, on fears of another hike in American interest rates.

The fledgling currency tumbled to $1.0201, a fall of almost one cent, after the European Central Bank decided to keep interest rates on hold.

Although the decision was expected, analysts seized on data in the US that revived fears of another rate rise.

According to the National Association of Purchasing Management, US manufacturing industry grew faster than expected in June - equivalent to GDP growth of 4.7 per cent.

Michael Saunders, euro analyst at Salomon Smith Barney, said: "The European investment community has read the decision as meaning the Fed will have to raise rates."

But he said recent figures, such as a positive European purchasing managers index pushed yesterday, showed a pick-up in Euroland that would feed through to the euro.

The markets also picked up on comments by Werner Muller, the German Economics Minister, hinting that rates were unlikely to be raised for some time. He said April's rate cut had "adjusted monetary conditions in such a way that the economy can exploit the existing production potential".

The euro's anniversary was clouded by rumours the ECB had "lost" 10 billion euros after only eight billion of the 18 billion issued as part of its weekly liquidity exercise showed up in its current account holdings.