LONDON, Nov 25 - The dollar sank to an all-time low versus the euro for a third consecutive day on Thursday and fell to a 4-1/2 year trough on the yen, hit by concerns about U.S. deficits and the view Washington is happy to see a weaker currency.
Warnings from Japanese and European policymakers did little to halt the dollar's slide, which acc elerated last week after Federal Reserve chairman Alan Greenspan said U.S. deficits were unsustainable and appetit e for U.S. assets was bound to dwindle.
"We have moved into a new stage of the dollar decline and (the dollar's fall) has become one of t he policy tools policymakers use. The move is very much a full-fledged policy event. Until policymakers truly protes t, what's going to stop the trend?," said Jim McCormick, head of foreign exchange research at Lehman Brothers.
The dollar The dollar also set new lows against other currencies -- a nine-year low against the Swiss franc . Weaker-than-expected data from Europe's largest economy had little effect on the euro. The Ifo re search institute's pan-German business climate index fell to 94.1 in November, its lowest since September 2003 and belo w forecasts.
"Data from the eurozone is largely being ignored. Everyone is running with the trend," said Krist jan Kasikov, currency strategist at Calyon.
SNOWBALLING
Several investment banks cut their dollar forecasts, with JP Morgan targeting the dollar at 100 y en and the euro at $1.35 by the end of this year.
French Finance Minister Nicolas Sarkozy said that the United States must be determined to reduce its deficits so that the currency does not distort trade exchanges.
Japanese officials, worried a rising yen would hurt a recovery in the export-oriented economy, al so stepped up their rhetoric.
Bank of Japan Governor Toshihiko Fukui said that recent movements in the foreign exchange market were not stable.
Earlier BOJ Policy Board member Hidehiko Haru said he would pay attention to any negative impact the recent rise in the yen had on the economy.
Japan's top government spokesman Hiroyuki Hosoda said the yen's recent surge did not reflect fund amentals and that authorities would act against rapid currency moves.
"The overiding sentiment on dollar is very, very negative and it's a question of playing chicken with the BOJ as to whether they intervene or not," said Tony Norfield, head of foreign exchange research at ABN AMRO. Japan has not intervened in currency markets since March, after a record 20 trillion yen.( )