NEW YORK: The euro fell below 1.40 dollars on Wednesday and backed away from reaching parity with the pound in thin holiday trading.
The European single currency was trading at 1.3969 dollars around 2200 GMT, down from 1.4068 dollars late Tuesday. The dollar edged higher against the yen, to 90.63 yen from 90.27 yen.
The volume of trading was low, with Tokyo closed for the New Year's holidays and activity on holiday in the US and European markets.
Thomas Lam, senior treasury economist with United Overseas Bank Group, cautioned that it was difficult to detect trends from recent movements in major currency pairs. "The thin liquidity conditions have the potential to exaggerate fluctuations," Lam said.
The US dollar was bolstered slightly by a fall in weekly unemployment figures in the United States, traders said.
John Kicklighter at Forex Capital Markets said the volatility in Wednesday's session was "likely a reflection of waning liquidity" but lacked momentum.
"Congestion is likely to remain in place for the rest of the week as traders wait for their ranks to fill out after the weekend before trying to force breakouts," he said.
Looking back over a year marked by the worst financial crisis since the Great Depression and heightened uncertainty, Calyon analyst Stuart Bennett said the yen was clearly the winner, the pound the loser.
"The gold medal currency in 2008 was the yen, posting a total return of 25 percent versus the dollar and almost 30 percent against the euro," Bennett said.
"The wooden spoon goes to sterling, which lost 23 percent against the greenback and 20 percent versus the single currency."
The euro celebrates its 10th anniversary Thursday and the occasion will be marked by Slovakia becoming the 16th country to adopt the single European currency. The koruna, which has been in use since the Czech Republic and Slovakia split in 1993, will be withdrawn from January 16.
Most Europeans believe the euro, which was launched on January 1, 1998, could surpass the dollar in global importance within five years, according to a survey released this week by the Financial Times and Harris institute.
The pound has struck historic lows against the euro in recent weeks as the Bank of England slashes interest rates to fend off recession. Referring to the euro-sterling rate, Emmanuel Ng, currency economist with OCBC bank, said there was a "very good chance it's going to test parity."
In late New York trade, the dollar rose to 1.0669 Swiss francs from 1.0595 late Tuesday. The pound climbed to 1.4613 dollars from 1.4410.
