AFP - The European single currency dropped under 1.49 dollars on Thursday as disappointing US economic data prompted renewed caution among investors, reducing demand for risky assets, analysts said.

In late morning trading here, the euro slid to 1.4871 dollars from 1.4961 late in New York on Wednesday.

Against the Japanese currency, the dollar fell to 88.98 yen from 89.34 yen late on Wednesday.

In commodity markets, gold prices ran into profit-taking after striking a record high of 1,152.85 dollars per ounce on Wednesday.

The euro was lower as "risk appetite is failing to show much improvement this week and sharply weaker-than-forecast US housing data dampened sentiment," said Calyon analyst Mitul Kotecha.

But players think the euro's broader uptrend is intact, and reports on US factory output and joblessness due later Thursday are "unlikely to lead to a reversal in sentiment as concerns about the pace of growth intensify," Kotecha added.

Demand for high-yielding currencies such as the euro -- seen as more vulnerable to weakness in the global economy -- declined after the release of lacklustre US data on inflation and housing starts.

But the greenback's gains were capped by speculation that the US Federal Reserve will keep its interest rates low for some time, reducing the appeal of dollar-denominated assets, dealers said.

"A sub-par recovery and benign inflation outlook are the two main reasons why we believe the Fed will not hike rates for a long while yet," said Kotecha.

A report Wednesday showed US consumer prices rose by a higher-than-expected 0.3 percent in October, mainly due to higher gasoline prices, but markets remained more concerned about the risk of deflation, dealers said.

Meanwhile traders digested the latest global economic outlook from the Organisation for Economic Cooperation and Development (OECD).

The 16-nation eurozone has snapped out of recession sooner than expected but recovery will be slow, with annualised growth of 0.6 percent in the fourth quarter, according to the OECD.

The Paris-based grouping of 30 of the world's richest nations also urged governments to start withdrawing stimulus measures from late 2010.

In London on Thursday, the euro was changing hands at 1.4871 dollars against 1.4961 dollars late on Wednesday, at 132.33 yen (133.68), 0.8909 pounds (0.8934) and 1.5138 Swiss francs (1.5109).

The dollar stood at 88.98 yen (89.34) and 1.0179 Swiss francs (1.0096).

The pound was at 1.6692 dollars (1.6741).

On the London Bullion Market, the price of gold fell to 1,136.13 dollars an ounce from 1,149 dollars an ounce late on Wednesday.