The euro dipped towards record lows against the US dollar yesterday, although it recovered later in the day.

Amid concerns that inflationary pressures may slow growth in Europe, it incurred losses overnight and in European and Asian trading early yesterday.

It hit positive territory as business drew to a close in Europe. In the US, the currency changed hands at about $0.8980 in midday trade after hitting $0.8910 earlier.

But analysts said prospects for a significant recovery soon are not good as the US economy continues to grow strongly.

Triggered by fears that the European Central Bank (ECB) would not raise its core interest rate after an influential index showed German growth was slowing, the latest bout of weakness also followed a decision by the US Federal Reserve not to change rates because inflation there remains contained despite robust growth.

Yet the ECB's chief economist Mr Otmar Issing indicated yesterday that average euro-zone inflation was unlikely to fall to the bank's 2 per cent ceiling this year, suggesting that a rate rise was still likely.

Meanwhile, the German finance minister, Mr Hans Eichel said he saw no inflationary dangers in Germany and called for calm about the currency's recent fall. "The inflation rate is going down. If you strip out oil price increases, there is no threat to stable prices in Germany," Mr Eichel said.

In Dublin, economists attributed the euro's weakness to the strength of the US economy.

"The Fed is coming to the view that a growth rate of 4 per cent is sustainable. The European economy is nudging 3.5 per cent, but a big element of that is due to the smaller economies." said NCB Stockbrockers chief economist Mr Dermot O'Brien. "I feel that at this point there's very little Europe can do to change that focus."