LONDON (AFP) — The euro hit a 19-month low on Tuesday against the dollar on news of another plan to stimulate the US economy as evidence mounted of a European slowdown, traders said.
In London morning trading, the European single currency sank as low as 1.3208 dollars -- which was last seen on March 16, 2007.
It later stood at 1.3232 dollars from 1.3343 dollars late in New York on Monday.
Against the Japanese currency, the dollar fell to 101.17 yen from 101.86 yen.
US Federal Reserve chairman Ben Bernanke boosted market sentiment by throwing his support on Monday behind another US stimulus package to kickstart the economy, warning there was a risk of "a protracted slowdown."
"We have fretted at times that the markets have become progressively more reliant on policy initiatives to prevent confidence sliding lower," said Calyon analyst Daragh Maher.
"But like any addict, the danger of this is that the announcements need to become bigger, more frequent and generally have a diminishing effect.
"Now that most economies have already announced their plans for rescuing their respective banking systems, and have delivered interest rate cuts to buoy the real economy, the danger is that the market addicts will not get their fix.
He added: "Thus it was perhaps with some relief that the markets greeted Fed chairman Bernanke's suggestion that another fiscal stimulus package might be warranted."
World stock markets showed further signs of recovery Tuesday, with most Asian and European stocks rising on hopes of another US economic stimulus package and a thaw in frozen credit markets.
Bernanke backed a second stimulus package this year to jump-start the sluggish economy, battling tight credit, falling house prices and rising unemployment.
"With the economy likely to be weak for several quarters and with some risk of a protracted slowdown, consideration of a fiscal package by the Congress at this juncture seems appropriate," Bernanke said Monday in testimony before the House of Representatives budget committee.
Market players were meanwhile looking to see the effects of the credit crunch on companies ahead of a raft of earnings reports due in the coming weeks in the United States and Japan.
"We are now worried about economic fundamentals, and economic indicators for the time being are expected to log weak results," Hiroshi Maeba, a senior dealer at Nomura Securities, told Dow Jones Newswires.
In London morning trading on Tuesday, the euro changed hands at 1.3232 dollars against 1.3343 late Monday, at 133.73 yen (135.91), 0.7763 pounds (0.7771) and 1.5262 Swiss francs (1.5345).
The dollar stood at 101.17 yen (101.86) and 1.1544 Swiss francs (1.1501).
The pound was at 1.7091 dollars (1.7164).
On the London Bullion Market, the price of gold fell to 779.72 dollars an ounce from 795 dollars late on Monday.
