The dollar dropped to record lows against the euro for the sixth day in a row yesterday, as traders seized upon disappointing jobs data as their latest reason to sell the troubled US currency.
The sell-off began immediately after the release of the non-farm payroll numbers, which showed that the US had created 57,000 jobs in November, as opposed to the 150,000 that had been expected by the market.
The dollar instantly fell to $1.2145 against the euro and, finding little support in thin Friday trade, later extended its decline to $1.2170 after the European markets had closed. It was hovering around $1.2162 in New York last night.
Analysts said a move to $1.25 could come before the end of the year, as traders continue to focus on market headlines rather than economic fundamentals.
Mr Niall Dunne, financial markets economist with Ulster Bank, believes a drop to $1.22 is most likely, arguing that the dollar may have gone "too far, too soon".
He acknowledged that the weaker-than-expected jobs data should check the more optimistic forecasts for the US economy, but said the extent of this week's dollar selling was a touch "unfair".
Mr Dunne nonetheless believes that further dumping could follow next week in the absence of dollar-supportive economic releases.
"The headline drives everything," he said.
Mr John Moclair, head of domestic corporate sales with Bank of Ireland Treasury and International, agreed that the dollar's fall was driven by sentiment rather than deep economic conviction. He suggested, however, that a "reversal of sentiment" could occur over the remainder of this month, as low pre-Christmas volumes create opportunities for volatile moves.
Mr Moclair said Irish corporates looking to hedge their dollar exposure at the moment were "caught between a rock and a hard place", with short-term currency shifts almost impossible to predict.
"It's a dangerous time," he said, adding, however, that there was "a case for doing something to make sure you're not on the wrong side for 2004".
Bank of Ireland expects the dollar to rise back to $1.05 against the euro over the course of next year.
