Weakness in the dollar yesterday helped propel the euro to its highest level against the greenback in almost three years

Currency traders said fears about worsening relations between the US and North Korea weighed on the dollar, with the impact on the exchange rate exaggerated by very light holiday trading. The euro reached $1.0364 on European markets before slipping back to $1.0341 in afternoon trade. The currency has now risen 17 per cent from a low of around 86 US cents in February. The pound appreciated marginally against the dollar, again in light trade, up 0.0022 at $1.5979. The Swiss franc also showed gains. City analysts said the euro is likely to fall amid stumbling demand in the depressed euro-zone economies. European economic affairs commissioner Pedro Solbes yesterday confirmed that gloomy outlook as he predicted Germany’s sluggish economy may lead the European Commission to trim its forecasts of euro zone growth. According to reports from Spain, Solbes said the commission’s 0.8 per cent growth forecast for 2002 "could be revised slightly downwards given the evolution of the German economy". Despite the prediction, Solbes repeated the commission's forecast of 1.8 per cent growth in the euro area in 2003.