"The immediate future still looks fairly grim--we see no immediate upside," said global markets strategist James McKay at Commonwealth Bank of Australia.

"Europe is falling into a political and economic quagmire with slowing growth and politicians trying to stimulate growth by baiting the European central bank," he said.

According to the mean forecast of 20 currency strategists polled on Friday, the euro would be at $1.0868 in one month, edging up to 1.0941 in three months, $1.1189 in six months and $1.1475 in 12 months.

The two-month-old currency was trading in late London trade on Friday at $1.0855--slightly above its all-time low of $1.0785 hit on Thursday.

Some analysts said they are still betting on a slowdown in the US economy in the second half of the year to propel theeuro higher. "We expect that the US economy will slow down in the second half of this year and the economic growth prospects for the euro will be more bullish for the second half," Commerzbank economist Bernhard Pfaff said.

But analysts' 12-month forecasts contrasted starkly with average expectations just two months ago that the euro would be trading around $1.22 by the end of 1999. Some analysts had been forecasting that the euro would be trading around $1.36.

Analysts said the euro had been pulled down by worse than expected growth in the 11-country euro zone combined with an unflagging US economy and weakening yen as the Japanese aggressively ease monetary policy.

In addition, German tax reforms were making investment in Germany--the euro zone's largest economy--less attractive to outside investors, they said.

And they said that strident calls from politicians--particularly German Finance Minister Oskar Lafontaine--for lower rates and the lack of harmony over policy issues within the euro zone werenot boosting the euro's cause.

"When the German minister of finance when he says he wishes to see lower interest rates, he is taking the euro down," said Bolli Hedinsson of Bunadarbank in Reykjavik. "That has really affected the exchange rate of the euro."

Analysts said there would be a far greater chance of a cut in euro zone short term rates if politicians ceased piling pressure on the ECB to ease. "The ECB has every economic justification to cut rates," said Howard Archer of NatWest.

And analysts said that while they believed the euro was here to stay, pressure on the central bank and the recent loud disagreements within Europe over overhauling European Union finances risked raising doubts about future of the euro.

"There has been far too much political effort to allow the euro to fail, but the unholy bickering raises concerns about the whole credibility (of the euro)," said Archer.

ECB President Wim Duisenberg on Thursday called on politicians to work harder to build confidence in the newcurency.