The euro has risen above the $1.30 level for the first time in its history, despite figures showing a narrowing of the US trade deficit, which had been a key worry for investors.
The single European currency peaked at $1.3005 in afternoon trading in Europe, though it quickly fell back to $1.2965. By 8pm tonight, it was trading at €1.2896.
Dealers are worried about how the US will attract the necessary capital from abroad to fund the deteriorating trade balance and budget deficit. The fear is that overseas investors might lose confidence in the debt-ridden US economy, placing their money elsewhere.
Analysts say market concerns about the deficits have increased in the wake of US President George W Bush's re-election win last week.
Earlier the European Commission urged the EU's 10 new members to speed ahead with preparations for a 'big bang' adoption of the euro, which some want to use in barely two years' time.
The commission noted that four of the EU countries that joined in May were planning to adopt the single
currency in 2007, while the other six plan to be using the currency by 2010 at the latest.
In a report on practical preparations, it urged the mostly ex-communist states to introduce euro notes and coins from the start, rather than having a transition phase before the full-blown launch, as the current 12 members did.
