LONDON, Jan 5 - The dollar continued its downward spiral on Monday, hitting yet another low against the euro, helping send gold prices to 14-year highs and pushing Japanese authorities to step in to protect the yen. Stock markets -- which had their best year in 2003 since 1986, according to at least one calculation -- were mixed. European shares hovered around break even, but Tokyo ended its first session of 2004 up more than one percent. The new year showed no sign of breathing new life into the U.S. currency, which tumbled last year amid doubts about the United States' ability to fund its current account gap. U.S. Federal Reserve Governor Ben Bernanke on Sunday added to dollar weakness with comments that while the U.S. economy had turned a corner, the central bank was right to hold interest rates at 45-year lows given the low rate of underlying inflation. The dollar fell as low as $1.2695 per euro , before paring losses. "It's the continuation of where we left in 2003 -- the U.S. needs more inflows to fund its widening current account deficit in the environment of cyclical growth, but stronger growth will exacerbate the deficit," said Steven Pearson, chief currency strategist at Halifax Bank of Scotland Treasury Services. Dollar losses were limited against the yen due to suspected intervention by the Japanese authorities on the first trading day of 2004 in Tokyo. It stood at 106.95, above last week's three-year low. The dollar weakness, however, made gold more attractive. It was at $417.30/418.05 an ounce, around a 14 year high.
STOCKS, BONDS
European shares were effectively flat, taking a breather after an eight-session winning streak to 16-month highs. Research by Dresdner Kleinwort Wasserstein showed that global equity markets ended 2003 up 31 percent for the year, the highest since 1986. "People are coming back to their desks and assessing what they should be doing for the next few weeks, but things look bullish as valuations are not very demanding and interest rates are not likely to rise dramatically to completely destroy the investment case for equities," said Rolf Elgeti of Commerzbank. The FTSE Eurotop 300 index <.FTEU3> was up 0.08 percent and the DJ Euro Stoxx 50 index <.STOXX50E> was down 0.11 percent. In Tokyo, the key Nikkei average <.N225> finished up 1.39 percent at 10,825.17, its highest close since November 5. The broader TOPIX index <.TOPX> was up 1.47 percent at 1,058.99. Euro zone government bond futures were higher on Monday, buoyed by the fresh record high for the euro against the dollar and the interest rate comments from Bernanke. The March Bund future was up two ticks at 112.76, having earlier scaled an intraday high of 112.90.///