The euro has continued to climb against the dollar, hitting a new three-year high of over $1.04.

For the past 11 months the single currency has been retracing ground lost four years ago when it was launched.

Uncertainty caused by the US threats of war against Iraq and the build-up of tension between the US and North Korea over nuclear weapons, have also unsettled traders.

"The mood for the dollar is very negative and it's the clearest theme for the first quarter next year," said Julian Jessop, chief European economist at Standard Chartered.

By 1648 GMT the euro had risen as high as $1.0419, its highest level since November 1999.

US troubles

A stronger euro is bad news for the economies of its 12 member countries because it makes their exports more expensive on the international market, while the US exports become cheaper in comparison.

The currency has gained 17% since last February, driven mainly by fears about US economic weakness rather than the strength of the euro zone economies.

The safe haven status of the dollar in times of war was undermined by the 11 September attacks last year and also the country's huge trade deficit.

The euro was launched as a currency on 1 January 1999, when the exchange rates of the 12 member countries were fixed, and it initially rose to $1.18 before declining to $0.8255 in October 2000.

Notes and coins went into circulation in January 2002.