July 12, 2007	Thursday	Jamadi-us-Sani 26, 1428

LONDON, July 11: The euro briefly struck a record pinnacle against the dollar on Wednesday amid US housing market concerns and the prospect of rising interest rates in the eurozone, dealers said.

The European single currency touched $1.3787 in early deals -- which was an all-time record high point. It later pulled back to stand at $1.3739.

The pound leapt to another 26-year peak at $2.0316 as the British currency was also buoyed by the outlook for higher borrowing costs in the coming months, analysts said.

Jitters about the impact on the US economy of the mortgage sector troubles prompted investors to scale back riskier investments, also boosting currencies such as the yen which has been hit hard by capital outflows in recent months.

The market has succumbed to its nerves over the sub-prime mortgage fallout in the US and bottled on higher risk assets across the board, said analysts at Dutch bank ABN Amro.

The foreign exchange market was spooked on Tuesday by a warning from Standard and Poor that it may cut credit ratings in the US on 12 billion dollars in sub-prime mortgage bonds, which are based on loans to people with patchy credit histories.

The fear was that downgrades would force sales by pension funds and the like, that are mandated to only hold securities above certain ratings, and thus spill over into broader losses at hedge funds and banks, ABN Amro analysts added.

The dollar's recent weakness has also been spurred by expectations that the US Federal Reserve will hold interest rates steady in the near future while European central banks tighten monetary policy.

The British pound breached 2.03 dollars on Wednesday for the first time since 1981.

Sterling is setting new 26-year highs around 2.03 dollars against the generally struggling dollar today, said Global Insight economist Howard Archer.

Elsewhere, the Bank of Japan started a two-day policy meeting Wednesday with markets on tenterhooks for any signals to support expectations of an interest rate hike in August or September. No change is expected this month from the current level of 0.50 percent.

The euro was changing hands at 1.3739 dollars, against $1.3745 late on Tuesday, 167.00 yen (167.47), 0.6774 pounds (0.6777) and 1.6547 Swiss francs (1.6523).

The dollar stood at 121.53 yen (121.76) and 1.2043 Swiss francs (1.2019). The pound was being traded at $2.0284 (2.0276).—AFP