The euro hit virtual parity with the US dollar on yesterday, but the European Central Bank president, Mr Wim Duisenberg, insisted there was no cause for concern.
He said the euro's decline reflected the boundless energy of the US economy rather than any weakness in the single European currency.
"It remains our firm belief that the euro has the potential over time to become stronger," he said.
In London, the euro changed hands at a then-record low of $1.0050 and at a record low of 102.35 yen - levels that were seen again in morning trading in New York. Several minutes after Mr Duisenberg statement, the euro fell further in London to a low of $1.0038. It later recovered to $1.0090, from Friday's close of $1.0136.
Pressed on where he thought the euro really ought to be, the ECB president said: "I don't know what the correct level is - and if I knew it, I wouldn't say it." Analysts said the euro was suffering from technical trading and widespread speculative selling as the market braced for the fall to dollar parity.
"There are not many players in the market left to buy euros," said Mr Jesper Dannesboe, an economist at ABN Amro bank. Though "a small chance" exists that the ECB might intervene, Mr Dannesboe doubted that the euro would fall that much lower, because of the fundamental economic outlook in the 11-state euro zone.
After the euro was launched on January 1st amid considerable fanfare, it was trading near $1.17. Its current value thus represents a fall of 15 per cent since the start of the year, although observers remembered that it suffered a similar plunge several months ago - followed by a sharp rally.
Mr Duisenberg told the European Parliament's committee on economic and monetary affairs, which was meeting in Brussels, that the strong US economy was the "natural cause of exchangerate variations". But he argued that the euro is underpinned by solid price stability, a "moderate" current account situation, and robust economic growth after many years of recession.
"We are now clearly on the way to economic recovery," he said.
