The markets are bracing themselves for further pressure on the euro this week. Economists believe that the currency could fall further. This follows last week's slump in the euro which drove the value of the pound to its lowest level against sterling for 15 years. The pound fell to 79.63p sterling in late dealings in Dublin on Friday, leading to fears that further falls would lead to higher inflation through a rise in import prices.

The price of imported consumer goods from Britain could be affected through the weakness of the pound to sterling. Also, the rise in the dollar will feed through to higher oil and petrol prices.

The euro fell to $1.008 against the dollar on Friday, the lowest level since its launch last January. Two weeks ago some economists were predicting a drop in the value of the euro to $1.0000 but the sentiment has turned more gloomy since then, with one London dealer predicting a fall to $0.95 this year.

Trading in the euro had been very thin recently, which accentuated price movements. However, dealers reported a reasonable amount of dealing on Friday.

The continued decline in the euro has questioned the commitment of the euro-governments to economic restructuring, which some analysts said could threaten the policy credibility of the European Central Bank.