July 24, 2007	Tuesday	Rajab 08, 1428

LONDON, July 23: The high-flying euro jumped to a new record against the dollar on Monday on fears that a downturn in the US housing market could infect the broader economy.

The single European currency in late-day trade was at $1.3817 after $1.3820 in New York on Friday. But the euro at one point surged to a new all-time high of $1.3845 before falling back.

The pound sterling rose to $2.0603, its highest reading since 1981.

The dollar was meanwhile trading at 121.34 yen against 1.21.26 on Friday.

The greenback came under heavy pressure from concerns that a weakening US housing market could drag down consumer demand and thereby hamper momentum in the economy as a whole.

But the dollar has also been hurt by prospects for higher interest rates in the eurozone and Britain, which make the euro and the pound attractive to investors.

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

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

“The dollar continues to struggle under a toxic combination of eroding yield advantage, deteriorating credit markets and firm crude prices, which in combination have damaged the ability of the US to attract easy current account financing,” said analysts at UBS.

The euro’s slight fall-off on Monday reflected concerns that the difficulties in the US housing market, notably affecting “sub-prime” lenders to people with questionable credit histories, could spread to Europe.

Matthew Foster-Smith at Thomson IFR Markets noted that Standard and Poor’s on Friday downgraded European sub-prime-backed debt.—AFP