NEW YORK – The dollar fell to a record low yesterday against the euro, which spiked at $1.3640 as the dollar’s slide continued in thin, post-Christmas trading.

In late New York trading, the euro eased slightly to $1.3620 – above the previous high of $1.3548 set on Friday in light pre-holiday trading, and more than a cent higher than Thursday’s late New York rate of $1.3493. American trading was largely curtailed Friday ahead of the Christmas holiday.

The sharp rise in the euro was helped by yesterday’s low liquidity, which was about half of that on a normal day, said a senior foreign exchange analyst at CMC Group in New York, Chris Callander.

Also, traders were encouraged by talk among analysts that the euro could hit $1.50 or $1.60 by the end of 2005, Mr. Callander said.

However, with market movements so exaggerated due to low volumes, he does not expect the euro to climb rapidly for much longer.

“There are support levels at around $1.35, but there’s less support than there is resistance at around $1.36, $1.37,” he said.

“In a low liquidity market, it can revert very quickly,” he added.

The dollar weakened across the board yesterday. The British pound was quoted at $1.9335 in late New York trading, up from $1.9201 late Thursday, while the dollar bought 103.10 yen, down from 103.70; 1.2193 Canadian dollars, down from 1.2334, and 1.1356 Swiss francs, down from 1.1440.

The dollar has fallen steadily against the euro and other major currencies in recent weeks on worries over the large American trade and budget deficits – factors that can undermine a country’s currency. With no short-term fix for those deficits in sight, many analysts expect the dollar to continue weakening and some have predicted a euro level of $1.40 or higher by the end of 2005.

Though Washington professes a “strong dollar” policy, most observers believe the American government is content to see the dollar fall because it makes American exports cheaper and can help export-dependent sectors of the economy.

It’s feared the stronger euro could hurt Europe’s economy by making its exports more expensive. On the other hand, it helps cool inflation by making imports – particularly oil, which is priced in dollars – cheaper.

Other consequences include higher costs of living for Americans abroad. The American military has given troops stationed in Europe a 31% increase in their cost-of-living adjustments to help make up for the diminished purchasing power of their salaries.