The single European currency in late-day deals was at 1.2139 dollars against 1.2146 late on Monday in New York. The dollar was trading at 108.45 yen against 109.33 on Monday.

Analysts said pressure on the ECB was likely to have increased by the Riksbank’s decision to cut its key interest rate by 50 basis points to an historic low level of 1.50% in a bid to spur economic growth following recent weak macroeconomic data.

The Riksbank also revised downwards its growth forecast for 2005 and 2006, from 3.2% for both years to 1.9% in 2005 and 2.7% in 2006.

The rate cut, which will be effective from Wednesday, was larger than expected by most financial market analysts, who had been looking for the bank to shave just 0.25 points off the rate.

The Riksbank move raises concerns about the outlook for the eurozone and ECB rates and had spillover effects onto the euro. Those concerns about growth were highlighted further this morning by disappointing French consumption data.

Official figures showed French household consumption of manufactured goods fell 0.9% in May compared with a revised 1.1% rise in April and expectations of a more modest 0.2% decline.

The later ZEW survey of German business confidence did little to alter sentiment towards the single currency and the pressure on the ECB.

The ZEW said its German economic expectations index for June climbed 5.6 points to 19.5 from 13.9 in May and expectations of a rise to 7.3.

The dollar, which was in the doldrums for much of the last couple of years on concern over the huge US budget and current account deficits, has been buoyed this week by the political cloud hanging over the EU as well as a greater emphasis on developments related to yield differentials.

While the ECB is being urged to cut rates from 2.0% to help boost anemic economic growth, the US Federal Reserve is poised to continue raising the cost of borrowing from the current 3.0% in a measured manner, possibly to 4.0% by the year’s end.

Analysts said Fed rate expectations are unlikely to change too much this week given the dearth of US economic news and as a result the dollar may find it difficult to break through to new multi-month highs.