updated 12/30/2004 4:03:05 PM ET 2004-12-30T21:03:05

The dollar slipped to a record low Thursday against the euro in thin, volatile holiday trading.

Major Market Indices

The euro peaked at $1.3667 before easing slightly to $1.3648 in late New York trading, above Wednesday’s late rate of $1.3598 and the previous record set Wednesday of $1.3646.

The euro also reached an all-time high against the Japanese yen of 141.61 in Asian trading Thursday, then eased back to 140.49 yen in late trading in New York.

Trading volume during the Christmas and New Year’s holidays has been light, causing exaggerated currency swings in foreign exchange markets. The low liquidity has encouraged traders to aim for new record highs and lows, said Greg Niebank, a trader at CMC Group in New York.

“When you’re close to highs and close to lows, they do get targeted,” Niebank said.

In late New York trading Thursday, the dollar posted losses against other rival currencies. The U.S. currency fell to 102.97 yen from 103.83 late Wednesday; 1.1311 Swiss francs from 1.1345; and 1.2036 Canadian dollars from 1.2131. The British pound was stronger at $1.9249, up from $1.9172 late Wednesday.

The dollar fell despite a bigger-than-expected drop in unemployment claims reported Thursday by the Labor Department. New applications filed for jobless benefits declined by a seasonally adjusted 5,000 to 326,000 for the week ending Dec. 25. Economists were expecting claims to rise to around 335,000.

The growing U.S. trade and budget deficit have weighed down the dollar, and many analysts predict the dollar will keep weakening into the new year, with the euro likely hitting $1.40 or higher by the end of 2005.

The 12-nation euro initially fell against the dollar after its 1999 debut, but it has risen about 66 percent since bottoming out at 82 U.S. cents in October 2000.

Though Washington professes a “strong dollar” policy, most analysts believe the U.S. government is content to see the dollar fall because it makes U.S. exports cheaper and can help export-dependent sectors of the economy.

European officials fear the stronger euro could hurt their region’s economy by making exports more expensive. On the other hand, it helps cool inflation by making imports cheaper — particularly oil, which is priced in dollars.

European officials, including European Central Bank president Jean-Claude Trichet, have publicly voiced discontent about the euro’s sharp climb.

“There is a rapid appreciation of the euro that is absolutely worrisome,” Italian Premier Silvio Berlusconi said during his year-end news conference Thursday.

Still, the premier said he had spoken to U.S. President George W. Bush about the problem and was assured that a weak dollar isn’t U.S. policy.

In an article for Thursday’s edition of the business daily Handelsblatt, German Chancellor Gerhard Schroeder signaled concern over the dollar’s weakness.

“A stabilization of the exchange rate system requires above all the balancing of existing global economic imbalances, whose causes do not lie in Europe,” he wrote.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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