Traders contacted by Reuters said it was unclear whether these orders were executed for commercial purposes or were intended to signal official intervention to support the euro, which had slumped to record lows against the dollar and sterling for the second day.

The ECB, the Bundesbank, the Bank of Italy and the Bank of England all declined to comment on the reported central bank activity in the forex market. "There was talk of intervention which boosted the euro, it was unlikely to be intervention but the reaction we saw reflects a nervous, short market," said Rob Hayward, economic adviser at Bank of America in London. "The euro has come down so far and so fast that people are inclined to take profits, but the sentiment remains negative for the euro and we could see new lows - we are not too far away."

The euro rallied as far as $0.8955 having tumbled to a record low of $0.8848 which marked losses of more than three percent on the week and around 24 percent from levels at which it was launched in January, 1999. Euro/sterling fell as far as 56.79 pence. The single currency's weakness pushed the Swiss franc to 11-year lows against the dollar beyond 1.74 francs. Traders said they saw central banks bidding for a small amount of euros between $0.8835 and $0.8850 on Electronic Broking System (EBS).