Before recovering a little on profit-taking, the euro fell to $1.0326, which is equivalent to 1.8941 marks. The last time the mark -- which before European economic and monetary union was universally regarded as Europe's benchmark currency -- was this weak was on Aug. 6, 1997. At that time, the mark traded at 1.8910 to the dollar, an eight-year low.

A consistently weakening euro could undermine international investor confidence in Europe's new unified currency and, thereby, eventually force Europeans to live with higher interest rates than they might otherwise. But a weakening euro also carries benefits.

For one, it makes goods manufactured in the 11 euro-zone countries more competitive on world markets, which in turn gives a boost to economic growth at a time that big countries such as Germany, France andItaly sorely need it. In particular, "a depreciating euro will help Germany when little else is helping Germany," said Klaus T. Said, the global head of foreign exchange at J.P. Morgan & Co. "Germany has a big exporting industry."

Acceptance in Capital Markets

What's more, the euro is fast gaining acceptance in international capital markets: More euro-denominated bonds have been issued this year than were in the 11 so-called legacy currencies in the same period of 1998; and so far this year, nonfinancial corporations have issued as many as five times as many bonds in euros as they did in the same period last year in the component currencies.

Some analysts and traders also contend that traders and investors are too fixated on the euro zone's two so-called sick men -- Germany and Italy -- and not enough on smaller countries such as Spain, the Netherlands and Ireland, which are growing healthily.

In late New York trading on Wednesday, the euro stood at $1.0350, compared with $1.0451 late Tuesday.The dollar also rose to 121.15 yen from 120.63 yen the day before, and the British pound fell to $1.6055 from $1.6118 late Tuesday. At its low point on Wednesday, the euro was down 12 per cent from its birth on Jan. 1.

Duisenberg Cites Potential At a news conference after the ECB governing council's regular meeting, European Central Bank President Wim Duisenberg played down concerns about the euro's decline. Stressing the euro zone's still-favorable inflation outlook, he said the euro had "a clear potential" to rise.

And in contrast to Bundesbank President Hans Tietmeyer's recent remark that he would be unhappy if the euro dropped further, Duisenberg said, "I'm not going to express myself about being concerned or not concerned. I'm inclined to play down short-term volatility movs in the exchange rate." He also minimized the recent decision by the ECB's European Union brethren to permit Italy to have a larger budget deficit than initially targeted. "It certainly doesn't transgress the stability act,"Duisenberg said.

Duisenberg's relatively relaxed attitude toward the euro surprised some traders and analysts, who said the currency fell to new record lows after he spoke. "In the context of how weak the euro was in the morning, the market expected him to be more hawkish," said Michael Metcalfe, currency strategist at NatWest Global Financial Markets.

Despite European officials' recent attempts to get their act together, Neil Parker, a treasury economist at Royal Bank of Scotland, predicted the euro will continue to be undercut by "the lack of coordination between central bankers and finance ministers and a lack of urgency" to defend the currency. "Speculators see the ECB's lack of concern as a further reason to sell the euro," Parker added.

"We need to make an effort to speak with one voice," Duisenberg acknowledged. "Our song is the same, but we need more practice to get in harmony."