LONDON, Nov 8: The euro fell to a two-year low against the dollar here on Tuesday, weighed down by prospects for future US interest rate hikes and concern over unrest in France, but later clawed back some lost ground

The single European currency in late-day trade was at $1.1771 after $1.1802 late Monday in New York. The euro at one point dropped as low as $1.1711, its weakest reading since November 2003.

The dollar was meanwhile trading at 117.14 yen against 117.66 on Monday.

Currency analysts said the euro encountered selling pressure as unrest in mainly African and North African suburbs in France was seen as threatening the country’s social fabric and raised fears of copycat disturbances elsewhere in the 12-nation eurozone.

“It may be that global investors have taken fright at the signs of social and political instability in France, fearing that the disturbances might spill over into other eurozone member states,” said Stephen Lewis, an analyst at Monument Securities.

But it is not just the disturbances that weighed on the euro. Diminishing expectations of an imminent interest rate hike from the European Central Bank and repatriations by US companies worked to undermine the euro against the dollar.

“For the medium-term, the risk of a softer euro persists as sentiment remains poor and both interest-rate spreads and capital flows work against the euro,” said Benedikt Germaier, FX strategist at UBS.

“The euro is likely to trade in a $1.15-1.20 for now,” he added.

The ECB has kept its key refi rate unchanged at 2.00 per cent since June 2003. ECB president Jean-Claude Trichet last week dampened expectations of a hike at the December rate-setting meeting.—AFP