The dollar fell to a new record level against the euro dropping to $1.3482 from yesterday’s level of $1.3390 in New York trading yesterday. The drop was caused by a number of factors, among them the speculation that President Bush is not likely to change his economic policies and will take no action to stop the dollar from falling.

``The U.S. government is happy to see the dollar fall,’’ said Shahab Jalinoos, a currency strategist in London at ABN Amro Holding NV. ``Exports become more competitive and it creates jobs,’’ he said. ``The big surge in the euro versus the dollar will continue into next year.’’

The likelihood of ECB intervention has become more remote as an ECB council member Guy Quaden said euro’s strength hasn’t been ``too troublesome.’’

Trading thinned towards the end of the year, as Japan has a holiday today, the U.S. has a holiday tomorrow, and London markets will be closed on Dec. 27 and 28.

"The dollar has weakened quite substantially in the fourth quarter and there has been some consolidation in the last couple of weeks. Just from a risk-reward point of view, there is no incentive to put on major new positions ahead of year-end," said Callum Henderson, head of currency strategy at Standard Chartered Bank in Singapore.

Dollar fall was precipitated by the fact that it broke a level at which many traders placed stop-loss orders, commanding to sell the currency on the breach of a certain level.

"There has been a general dollar weakening which has taken the euro above some near-term resistance levels at $1.3420/1.3440," said Ian Stannard, currency strategist at BNP Paribas. "We could test the record highs at $1.3470, although it is not clear we have the momentum to do so in this trading environment."

There is widespread fear that US economy can be seriously affected if foreigners stop buying US Treasuries closing the record gap in the country’s current account deficit. This concern was voiced by Fed chairman Alan Greenspan who caused a drop in dollar and Treasury securities by saying foreigners can get tired of helping US out and instead diversify into other currencies or demand higher U.S. interest rates.