The dollar fell to its lowest level since November 1999 against the euro after US payrolls declined in December, raising concern the economy may slow.
"What you need to cover the current account deficit to sustain current levels isn't coming in any more," partly because of "the decrease in appeal of US assets," said Ihab Salib, who helps manage US$186 billion of US and international assets at Federated Investors Inc.
"Continuing dollar weakness over the next 12 to 18 months" is likely, he said.
The dollar fell to US$1.0574 per euro at 5pm in New York, from US$1.0484 yesterday, after earlier reaching US$1.0583, the weakest level since Nov. 1, 1999. The dollar dropped to Japanese yen 119.23, from Japanese yen 119.37. It also declined against the Swiss franc and Canadian dollar and nine other major currencies.
Salib expected the dollar to reach US$1.10 by yearend, though given the pace of the dollar's drop, "you can definitely see that a lot sooner," he said.
The dollar had its fifth weekly decline in six, a period in which it lost 6 percent.
The US currency fell to SF1.3805 from 1.3921, and to C$1.5457 per US dollar from C$1.5517.
The yen fell 126.09 per euro from 125.15 yesterday, reaching a 3 1/2-year low, after North Korea pulled out of a global treaty on nuclear-arms control, increasing concern the country will obtain weapons that threaten Japan, the world's second-biggest economy.
The US budget deficit was US$159 billion in the year ended Sept. 30, and President Bush's economic proposal, on top of the need to finance a potential war, may push it to a record US$300 billion, according to Merrill Lynch & Co.
At the same time, the euro's rally threatens to slow the euro region economy because European goods will cost more in the US, said analysts.
"Growth in Europe will definitely be affected by the rising euro," said Salib.
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