Euro strikes another record dollar high

LONDON (AFP) — The European single currency touched a fresh record high against the dollar on Monday, lifted by concerns over the US housing market and favourable interest rate differentials.

The euro soared as high as 1.3845 dollars in earlier Asian deals. In European trading, the single currency pulled back slightly to 1.3820 dollars.

The British pound hit another 26-year peak of 2.0603 dollars.

"The dollar looks to be starting the new week much as it ended last — extending its gradual but unrelenting decline," said Commerzbank analyst Gavin Friend.

The dollar has been hampered by prospects of increased interest rates in the eurozone and Britain.

The European Central Bank appears set to lift eurozone borrowing costs in September from the current level of 4.00 percent, while the US Federal Reserve has frozen American rates at 5.25 percent for the past year.

The Bank of England was forecast by many analysts to hike British rates to 6.0 percent before the end of the year.

"The big picture (is) of a Fed on hold for an indefinite period, while other central banks continue to tighten," Friend added.

The dollar has also been on the backfoot on US economic concerns.

"The dollar remains weak because of concerns about the US housing market and worse-than-expected corporate earning reports which weighed on stocks," said Kikuko Takeda, currency research manager at the Bank of Tokyo-Mitsubishi UFJ.

Disappointment over company results and worries about problems in the US sub-prime mortgage sector — loans to homeowners with patchy credit histories — caused sharp falls on global equity markets on Friday.

Dealers added that the falls were affecting the 'carry trade' as investors grow more risk averse.

Carry trade is a risky but popular practice of borrowing money in countries with low interest rates, such as Japan, and investing in countries with high interest rates such as Australia or Britain.

The euro was changing hands at 1.3820 dollars, against 1.3820 dollars late on Friday, 167.29 yen (167.67), 0.6718 pounds (0.6727) and 1.6612 Swiss francs (1.6602).

The dollar stood at 121.05 yen (121.26) and 1.2024 Swiss francs (1.2007).

The pound was being traded at 2.0575 dollars (2.0546).

On the London Bullion Market, the price of gold rose to 683.20 dollars per ounce from 681.60 dollars late on Friday.