LONDON, Sept 13: The euro rose to fresh record highs against its US rival on Thursday, reaching $1.3927 in early European trade, while some economists forecast it could top $1.40 very soon.

The European single currency on Wednesday broke above $1.39 for the first time since its creation in 1999, on expectations that the US Federal Reserve will next week trim interest rates from their 5.25-per cent level.

After reaching a fresh all-time high of $1.3927 on Thursday, the euro stood at $1.3918, compared with $1.3839 in New York late on Wednesday.

“The catalyst sending the euro to its latest high against the dollar is the growing expectation that the Fed could trim interest rates by up to 50 basis points at its 18 September policy meeting,” Global Insight economist Howard Archer said.

“The euro seems likely to remain well supported against the dollar in the near-term at least and could well break through $1.40 imminently.” Investors are increasingly worried that the US economy may be heading towards a recession owing to a downturn in the American property market.

The Fed is set to cut rates “due to the danger that the current credit squeeze and sub-prime mortgage problems will increasingly spill over to significantly weaken already fragile US growth,” Archer added.

Roller-coaster volatility has gripped financial markets since early August as concerns about high-risk home lending in the United States have prompted investors to reassess their overall risk exposure.

“Much of the weakness in the dollar can be attributed to intensifying concerns about the US economy but if the Fed does cut (rates) as we expect, it may be able to help avoid deeper damage to the economy as lower rates provide a stimulus,” Calyon economist Mitul Kotecha said on Thursday.—AFP