Euro hits new lifetime low

The euro hit a new lifetime low yesterday despite renewed talk of currency intervention and forecasts of further interest rate rises by the European Central Bank.

The euro hit a new lifetime low yesterday despite renewed talk of currency intervention and forecasts of further interest rate rises by the European Central Bank.

The euro fell to record lows of $0.8510 against the dollar in overnight trading. The beleaguered currency mounted a recovery later in the day but by the close of trading in London, it was again close to all-time lows.

Analysts said there was growing doubt that a meeting of the Group of Seven industrial powers this weekend would sanction concerted intervention to stem the single currency's decline.

Meanwhile, the Danish krone hit new a lifetime low against the euro as more opinion polls confirmed a lead for the "no" campaign in next week's referendum on membership of the single currency. Although the krone stayed well within its permitted band inside the Exchange Rate Mechanism, falling investor confidence has already seen 10bn krone's worth of intervention by the Danish Central Bank.

The Bundesbank president, Ernst Welteke, said currencies would be discussed at the G7 meeting in Prague, adding that market intervention was a tool at the ECB's disposal. But he was doubtful if the US would back intervention. "We're in an election year and that makes me think it would be pretty difficult to get a clear position from the Americans," he said.

ECB vice president Christian Noyer said in a newspaper interview yesterday that the euro was "dangerously undervalued" and that the currency could see a "brutal" rebound.

Figures released yesterday showed inflation in the euro zone fell to 2.3 per cent in August from 2.4 per cent in July. Stephan Monissen, European economist at Salomon Smith Barney in London, said inflation would stay above the ECB's 2 per cent target for the rest of the year.