Euro sinks below dollar parity

LONDON, England -- The euro fell back below the dollar on Tuesday as investors sold off European stocks after two straight days of market routs, prompting speculation that the U.S. currency's decline may have run its course.

Despite massive sell-offs in U.S. markets, analysts believe investors could be growing tired of the volatility of European stocks and are looking elsewhere -- including in the U.S. -- to park their money.

The single currency sunk two percent against the dollar to 98.60 cents in early trading on Tuesday. The euro later strengthened to around 99.39 cents at 1430 GMT.

"The dollar didn't fall during the last couple of days even when U.S. share prices fell. So personally, I am left with the impression that the dollar's rout might have came to a halt,'' a dealer at Standard Chartered Bank in Tokyo, told Reuters.

The euro began trading on January 4, 1999, above $1.17, but declined steadily to a record low of $0.8225 in October 2000, down 30 percent from its starting level. As of January 1, 2002, the euro became the legal currency in 12 of the European Union's 15 member countries.

Last week, the euro again broke above parity with the dollar after the greenback came under increasing pressure as doubts over the strength of the U.S. recovery and the reliability of accounting standards damaged confidence in Corporate America.

Now, with European markets in turmoil and corporate profits failing to inspire investors, the dollar is attracting renewed interest.

"The market is having a reality check. Everyone's been selling the dollar for a while but they're now asking -- shouldn't I be careful what I am selling it against?','' Sonja Marten, currency strategist at Dresdner Kleinwort Wasserstein in Frankfurt, told Reuters.

Some analysts see the shift back to the dollar as strictly bookkeeping exercise.

"We've also been hearing of U.S. mutual funds selling overseas assets to pay redemptions to their domestic investors -- a repatriation story,'' Kamal Sharma, currency strategist at Commerzbank, told Reuters.

Others point to rumours that U.S. investment banks selling other currencies and buying the dollar because they need cash to cover losses due to their exposure to WorldCom, which filed for bankruptcy protection on Sunday.