updated 12/29/2003 11:06:06 AM ET 2003-12-29T16:06:06

The euro climbed above $1.25 for the first time Monday as it resumed its rise against the U.S. dollar in thin post-Christmas trading.

Major Market Indices

The 12-nation currency rose to a peak of $1.2506 in European trading, putting it past a previous high of $1.2473 reached Dec. 24.

The euro has been on a relentless upward march against the greenback, setting a string of new records since the end of November in a rise driven largely by fears about the U.S. trade and budget deficits.

Low trading volumes at the holidays also magnified exchange rate swings, and analysts say many traders are reluctant to counter the downward trend for the dollar.

The dollar has now fallen 19 percent this year against the euro.

The rally has led some economists and government officials in Europe to worry that the stronger currency will hurt a recovery expected to take hold next year. That's because the stronger euro makes exporters' goods more expensive compared with those of foreign competitors.

The chief economist for the German Chamber of Commerce and Industry said the stronger euro would hurt exporter profits.

"Every additional cent that must be expended for a euro on the currency markets narrows the profits in the U.S. market and in Asian markets," said economist Axel Nitschke.

The dollar's fall hurts euro-zone producers in Asia as well because many countries there peg their currency to the dollar, meaning those currencies fall against the euro when the dollar does.

Still, a spokesman for German Chancellor Gerhard Schroeder said his government wasn't worried yet.

"Of course we are following the exchange rate development very attentively, but at the moment I believe there is no cause for any concern, and no cause to consider any measures," said spokesman Thomas Steg. "The German export industry is extremely competitive and has very positive results to show even in view of the current currency developments."

He declined to say what exchange rate would worry the government.

Copyright 2003 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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