PARIS, Sept 10: The euro, weakened by prospects of recession in the eurozone, fell to an 11-month low of $1.4012 in volatile trade Wednesday, its lowest reading since October 9, 2007.

The slide was powered in part by a warning from the European Commission that the 15 countries sharing the euro were teetering on the brink of recession.

The commission cut its eurozone growth estimate for all of 2008 to 1.3 per cent from a forecast of 1.7 per cent given in April, marking an even sharper slowdown from the solid 2.6 per cent growth recorded last year.

Currency analysts described trading as volatile, with the market unsettled by news of a big loss — $3.9 billion — at US investment bank Lehman Brothers and persistent worries about the health of the US financial sector.

The single European currency later firmed slightly to $1.4033 against $1.4134 late Tuesday in New York.

The dollar firmed against the yen, trading at 107.84 yen after 106.89.

Uncertainty swirling around Lehman Brothers, notably the absence of a re-capitalisation scheme for the bank, intensified risk aversion in the market that tended to drive investors away from the euro and toward the traditional safe haven of the dollar, analysts said.

“The heightened uncertainty surrounding the financial health of Lehman Brothers has helped propel risk aversion to elevated levels,” said Lee Hardman of Bank of Tokyo-Mitsubishi.

“Our model indicates that the current level of risk aversion is approaching levels last experienced during the (US central bank) bail out of Bear Stearns.”

Traders likewise remained anxious about the soundness of the US financial and real estate markets as the sense of relief following the government’s weekend rescue of mortgage guarantors Fannie Mae and Freddie Mac faded.

In London trading on Wednesday, the euro changed hands at $1.4033 against $1.4134 late Tuesday, at 151.28 yen (151.10), 0.7996 pounds (0.8024) and 1.5931 Swiss francs (1.5923).

The dollar stood at 107.84 yen (106.89) and 1.1355 Swiss francs (1.1265).

The pound was at $1.7548 ($1.7611).

On the London Bullion Market, the price of gold fell to $775.75 per ounce at the fixing from $781.75 late on Tuesday.—AFP