The euro fell below $1.01 yesterday in quiet pre-Christmas trade. The single European currency slid again despite supportive statements made by European officials and encouraging Italian economic figures.

Audrey Childe-Freeman at CIBC said that despite the deluge of bullish news for the euro in the morning, most investors, having closed their books for the year, were reluctant to participate.

While remarks from the European Central Bank's chief economist, Mr Otmar Issing, about intervention in foreign exchange markets would have moved the market dramatically on a normal day, they were largely shrugged off in the thin market conditions, she said.

According to Mr Issing, such intervention could only be successful when executed at the "right time" and in concert with other major central banks.

The ECB's president, Mr Wim Duisenberg, meanwhile, reiterated his remarks that the euro was fundamentally stable, although there were concerns about the public's perception of it as a weak currency.

Although Mr Issing's comments did not constitute an outright threat, they implied the ECB had not completely ruled out intervention, Ms Childe-Freeman said.

Evidence of rising inflationary pressures in the euro zone failed to draw any reaction, as did strong economic performance in Italy and an upbeat assessment of the German economy from the Ifo economic research institute.

In November the euro-zone's harmonised index of consumer prices rose 1.6 per cent year-on-year, compared with expectations for a 1.5-per cent increase.

It said it expected German GDP to rise by an average 2.7 per cent in 2000, compared to 1.4 per cent in 1999.