NEW YORK (CNNfn) - The dollar soared to lifetime highs against the euro Monday after European authorities' seeming unconcern opened their currency to speculative attack, while stock-market volatility gave Treasury bonds a boost.
By 3:00 p.m. ET, the euro was deeply depressed at $1.0647, having followed its downward course to a record low of $1.0591 earlier in the day. The European currency hit its previous all-time low of $1.0632 in overnight trading.
Traders said comments from Wim Duisenberg, head of the European Central Bank, amounted to an admission of defeat for the euro.
"Not having an exchange rate policy -- and we do not have one -- does not mean there is benign or malign neglect," Duisenberg told the European Sub-Committee on Monetary Affairs. "For the time being there is neglect."
Duisenberg, the most powerful European fiscal authority, also said the euro has weakened since its January launch because the U.S. economy remains stronger than its continental counterpart.
The news only put the euro's weakness in stark relief, confirming weekend statements from European finance officials that implied that the European Union remains sublimely unconcerned over exchange levels.
France's Minister of Finance Dominique Strauss-Kahn told a meeting of the continent's monetary authorities that a waning euro poses "no problem" for Europe's economic outlook. German central bank president Hans Tietmeyer echoed the sentiment, saying he does not expect the euro to trade lower than par against the dollar, a plunge of up to 5 percent.
Currency traders took these comments to mean Europe won't aggressively intervene to defend its currency from speculators or other adverse trading factors.
Meanwhile, the euro's battered bulls were watching Germany, where the monthly Ifo business sentiment report is due Tuesday. The index has fallen consistently over the last 10 months, but traders hope the resignation of unpopular German Finance Minister Oskar Lafontaine will spark an upturn and give the euro a boost.
On the other hand, fear of prolonged hostilities between NATO and Yugoslavia continued to weigh heavily on the euro.
Among other disquieting weekend developments, Italy's Treasury Minister Carlo Azeglio Ciampi asked Saturday's pan-European finance meeting to tally the economic costs of the war, highlighting growing investor concern that Europe will have to bear the fiscal burden of the NATO effort.
Yen ignores threats
The yen fiddled while the euro fell, trading choppy against the dollar after a leading Japanese fiscal authority overnight started a new round of verbal currency intervention.
By late afternoon, the greenback slipped to 117.67 yen from its previous close of 117.92 yen.
Eisuke Sakakibara, Japan's vice-minister of finance known as "Mr. Yen" for his dogged attention to currency matters, warned speculators that Japan will take "decisive" action to keep the yen's value at an acceptable level near 120 to the dollar.
Sakakibara's comments were backed with the unstated threat of the Japanese government flooding currency markets with yen. However, yen bulls needed additional convincing, leaving the yen to its recent buoyant course.
Bonds back in spotlight
Although U.S. Treasury bonds got scant support from the dollar's mixed fortune, bond prices still surged in late trading as a bright start on Wall Street turned stormy.
The benchmark 30-year Treasury bond reversed its early losses to climb 11/32 of a point in price to 95-22/32, sending the yield back down to 5.54 percent.
A dramatic 4-percent plunge in the Nasdaq Composite stock index derailed a strong advance in the broader stock market and sent investors running back to the bond market, said Robert Brusca, chief economist at Nikko Securities
Trading was strictly flow-oriented with little fresh economic data on the horizon to tempt investors to take any firm positions one way or another.
-- by staff writer Robert Scott Martin