updated 3/7/2008 10:43:09 AM ET 2008-03-07T15:43:09

The dollar sank to a new low Friday against the euro, which extended its first-ever rise above $1.54 after data showed U.S. job cuts hitting the biggest monthly number in five years.

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The U.S. Labor Department said American employers cut 63,000 jobs in February — the starkest sign yet that the U.S. is heading toward a recession or in one already.

Those fears pushed the 15-nation euro to $1.5463, the latest in a string of record highs before it settled back slightly to $1.5413 in afternoon European trading — still above the $1.5370 it bought late Thursday in New York.

Also pushing up the euro were comments Thursday by European Central Bank president Jean-Claude Trichet, who made plain the ECB is more worried about inflation in the euro zone than the fallout from the rising euro.

That suggested the ECB’s benchmark interest rate will remain at 4 percent for the coming months, even as the U.S. Federal Reserve and, possibly, the Bank of England cut their key rates.

“The euro-dollar has taken another significant level this morning, having breached $1.5400,” said James Hughes of CMC Markets in London. “Although this may be initiating a degree of profit-taking in the short term, many will remain mindful of Trichet’s hawkish stance and tacit acceptance of a stronger euro at yesterday’s ECB rate-setting meeting.” .

European businesses say they are starting to feel the pinch, notably from U.S.-based buyers who assert that the high euro makes European goods more expensive.

Also Friday, the British pound traded above the $2 mark for a second day, buying $2.0185 — above the $2.0092 it bought in late New York trading the previous night. Like the euro, it jumped higher Thursday after the Bank of England kept its own interest rate unchanged at 5.25 percent.

The dollar fell to 101.99 Japanese yen from 103.09 yen on Wednesday, putting it at almost three-year lows.

“The prolonged silence from the Japanese camp in the face of the yen’s gains is not only historic but rather conducive to its ascent,” Ashraf Laidi, the chief foreign exchange analyst at CMC Markets in New York.

“The Federal Reserve’s persistent reiteration to take on the economic slowdown as its main priority over inflation will make the 100 yen figure an inevitability,” he said.

That could happen “as early as this month, especially if the Fed opts for a 75 basis point easing on March 18,” he said.

Lower interest rates can jump-start a nation’s economy, but can weigh on its currency as traders transfer funds to countries where they can earn higher returns.

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