Euro in fresh surge against dollar

The European Single cur-rency mounted a renewed assault on both the dollar and the yen yesterday amid growing fears that the world's two largest economies are in trouble.

The European Single cur-rency mounted a renewed assault on both the dollar and the yen yesterday amid growing fears that the world's two largest economies are in trouble.

The euro hit a 10-month high against the yen and a five-month peak against the dollar. The continued fall of the dollar benefited the pound, which rose by more than a cent to within sight of the psychological $1.50 mark.

The euro rose to 10-month highs above ¥106.50, up 10 per cent so far this month. The yen fell to a 16-month low against the dollar, slumping to ¥114.32. The yen was undermined by the latest set of figures to hint that the Japanese economy might be contracting. Industrial production fell 0.8 per cent in November, well below the 0.2 per cent rise expected. It came after disappointing unemployment and consumer spending data.

The euro hit five-month highs above $0.9340 against the dollar. The dollar was knocked by a fall in the index of leading economic indicators of the economy compiled by the US Commerce Department. This has now failed to rise in seven of the last eight months. The euro has gained against the dollar for five days in a row amid the mounting evidence that the US economy is slowing faster than had been expected and may even be heading for a recession.

A fortnight ago Alan Greenspan, the chairman of the Federal Reserve, hinted he was poised to cut interest rates, saying the risk of recession was at least as great a threat as rising inflation. Expectations of a cut in rates make the pound and the euro more attractive as many analysts believe interests rates in the UK and the eurozone may have to rise further.

Yesterday, the pound rose to a four-month high against the dollar to $1.4885, from $1.4787. Michael Rottmann, a currency analyst at HypoVereinsbank, said: "Sterling has the potential to go above $1.50."

Sentiment has also been boosted by the fact that the latest estimates show the 2.2 per cent US GDP growth in the third quarter means it is growing more slowly than the UK at 3.0 per cent. The gloomy outlook for the US economy also knocked Wall Street. The Nasdaq index of technology stocks slipped 1.5 per cent at one point on fears that a slowing economy would depress profits at computer companies. It later recovered into positive territory.

One company, Network Associates, saw its share price plunge by almost 70 per cent after the maker of computer-security software said revenues in the last three months of the year would be just a quarter of the previous period. A separate report showed that job cuts at internet companies rose 19 per cent in December to a record high of 10,459.

John Challenger, chief executive of Challenger, Gray & Christmas which produced the survey, said: "With the economy slowing ... it is unlikely we will see a return anytime soon to the high-flying days when it seemed that a new dot.com was going public every other hour."