The troubled single currency sagged as far as $0.8506, its lowest levelsince the day before a Group of Seven intervention aimed at propping theeuro on September 22, and drew near its all-time lows around $0.8440 hitlast month.

The euro had started to fall already on Friday as gains in the US stockmarket soothed fears of an equity meltdown. The US tech-laden Nasdaq rose by7.87 per cent on Friday.

The single currency extended last week's losses on Monday after MrDuisenberg told Britain's Times newspaper that it would be inappropriate forthe G7 to intervene to support the euro if the ongoing Middle-East crisisignited currency volatility. His comments eased wariness of an imminent G7action on the foreign exchanges.

"The euro's weakness today really stemmed from Mr Duisenberg's comments inthe Times," said Mr Deborah Read, economist at Bank of America in London."It was really the fear of intervention that was managing to hold the euroup. With that being reduced, it's having the opposite effect to what we seeas their (ECB) desired outcome."

By 1145 GMT, the euro was hovering around $0.8515. Against the yen, the eurowas within half of a yen of three-week lows around 91.80 hit on Friday.

Analysts said Mr Duisenberg's comments compounded criticism on Friday fromthe US presidential candidate Mr George Bush's economic adviser Mr LawrenceLindsey of the Federal Reserve's participation in last month's jointcurrency intervention.

But dealers said intervention wariness had not disappeared altogether andcould resurface if the euro were to approach rapidly its all-time troughs.

"The surprise element of intervention is something the ECB would want tokeep on their side," said a trader at a German bank. "What they don't wantis to pre-warn the market." A stronger than expected increase in Italianproduction data for August failed to support the euro, dealers said.

A meeting by the finance ministers of the euro zone, taking place inLuxemburg later on Monday, was not expected to come up with any significantstatement in support of the euro. The US Federal Reserve chairman AlanGreenspan is due to speak in Washington at around 1215 GMT.

The dollar, meanwhile, was racking up gains across the board, making headwayespecially against sterling and the Swiss franc, as Friday's recovery in theUS stocks encouraged unwinding of safe-haven positions accumulated duringlast week's jitters.

(Reuters)