LONDON, Nov 28: The euro charged into uncharted territory above $1.2 on Friday to reach a new record high as concerns about the large US current account deficit returned to haunt the greenback.

The single European currency rose to $1.2017 midway through the European session.

It later retreated to $1.2007, against $1.1908 late on Thursday.

The move came soon after the euro smashed through its previous all-time peak of $1.1979 set on November 19.

Dealers said there had been no particular trigger for the upswing, which came amid still-thin trading volumes after Thursday’s Thanksgiving Day holiday in the United States.

“At the moment, the move is purely speculative and technically driven,” said BNP Paribas analyst Iain Stannard, shortly before the euro topped $1.2.

The jump came after the US unit failed to draw strength from a recent flurry of surprisingly strong US economic data, held back by concerns about the large US current account and budget deficits, as well as global trade tensions.

“This move is coming from dollar weakness as investors are more focussed on the imbalances of the American economy with the twin deficits — there is a lot of negative sentiment towards the dollar around,” said Stannard.

The almost insatiable appetite of US consumers for foreign goods leaves the US economy hugely reliant on investment inflows and makes the dollar vulnerable to any signs overseas investors are putting their money elsewhere.

Figures released on November 18 showing a large decrease in foreign purchases of US stocks and bonds in September therefore fanned worries about how the United States will fund its large current account deficit.

And with Japan seemingly set on thwarting an appreciation of the yen against the dollar, the euro was the main beneficiary of the US currency’s weakness, noted Audrey Childe-Freeman, economist at the Canadian Imperial Bank of Commerce.

“In the longer term, the euro should continue to appreciate, climbing to $1.25 by next June,” Childe-Freeman predicted.

Another factor that has bolstered the eurozone unit in recent days has been speculation about possible takeovers of German banks by US rivals, analysts said.

Underlying support for the euro, used by 12 of the 15 members of the European Union, also came from indicators from the European Commission showing that the economic and business climate in the region warmed in November.

The commission’s economic sentiment indicator for the EU rose 0.6 percentage points to 96.5 points in November, marking “biggest rise of the indicator since its turnaround in summer”.

The eurozone saw a rise of 0.4 percentage points to 95.9 points in November.

But analysts said that economic data from the eurozone was only a background factor for the foreign exchange market.

“The relationship between the domestic economic numbers and the single currency has historically been poor,” said Commerzbank analyst Nick Parsons.

“Instead, the euro is simply the mirror image of investor attitude to the US dollar — the only one of two alternatives to the dollar which is not driven on a daily basis by fears of central bank intervention.”—AFP