LONDON, Jan 9: The euro fell sharply against the dollar despite weak US unemployment figures, which analysts said were in line with forecasts.

The European currency was also undermined by speculation about a further drop in eurozone interest rates next week, they said. In late trading here, the European single currency fell to $1.3486 from $1.3704 in New York late on Thursday.

Against the Japanese unit, the dollar dropped to 90.34 yen from 91.11 yen on Thursday.

The euro had earlier fallen versus the dollar in Asian deals, weighed down by expectations of an interest rate cut by the European Central Bank next week.

ECB president Jean-Claude Trichet warned of a “significant deterioration in the real economy” and “the possible threat of deflation,” adding to speculation about a rate cut Thursday.

Even though the eurozone slid into recession in the third quarter of 2008, retailers in the 15 countries using the euro last year saw demand pick up in November, official EU data showed on Friday.

On the London Bullion Market, the price of gold dropped to $847.25 an ounce from $855.75 late on Thursday.—AFP