Euro hits all-time low as traders offload

The Euro appeared to be in free-fall last night as it plunged below $0.87 against the dollar - a new lifetime low and a one-day fall of more than two cents.

The Euro appeared to be in free-fall last night as it plunged below $0.87 against the dollar - a new lifetime low and a one-day fall of more than two cents.

Traders rushed to sell the single currency as fresh divisions opened up between leading European politicians over the right policy for the beleaguered currency.

The single currency hit $0.8691 in New York trading - the lowest since its launch in January 1999 as traders said there was no reason to buy euros.

The pace of decline quickened after German Chancellor Gerhard Schroder said the fall was "no cause for concern". This followed his comment on Monday that a weaker currency was "more a reason for satisfaction, for joy than concern".

The European Central Bank said it stood by recent comments by its president Wim Duisenberg, that he understood public concern over the low level of the euro.

The European Union's economic affairs commissioner, Pedro Solbes said the level of the euro did not reflect "the strong economic fundamentals of the euro area". France's finance ministry said the euro would be discussed by finance ministers tomorrow. But a spokeswoman declined to comment there would be a formal communiqué on the euro.

Analysts said that in that absence of any intervention by Europe's politicians or central bankers the euro could fall below $0.80. Stephen Lewis, chief economist at Monument Derivatives in London said: "If no less a person than the German Chancellor takes a benign view of the euro's slide, the markets are not to be expected to feel confident in holding the currency."

The dollar made gains across the foreign exchange markets, pushing to an 11-year high against the Swiss franc and close to a new seven-year peak against sterling.

The fall in the euro against the dollar will alarm the ECB, which only a fortnight ago warned of the threat to its inflation target from the rising cost of commodities that are priced in the US currency.

The worry was compounded by a surge in the price of crude oil to a fresh 10-year high.

Brent for October delivery rose 55 cents to a new peak of $33.56. Traders were said to be anxious ahead of weekly US oil stock data from the American Petroleum Institute published over night.