LONDON, July 10: The euro hit a record high of $1.3740 on Tuesday as investors bought the single currency on prospects of higher eurozone interest rates and concerns about the health of the US economy.

The British pound also hit a 26-year high of $2.0275 ahead of a crucial speech by US Federal Reserve chairman Ben Bernanke, while on Monday the euro had reached a record peak of 168.51 yen.

The greenback is suffering from widespread concerns about the troubled housing sector in the United States, while analysts also remain uncertain about the outlook for inflation and jobs in the world’s biggest economy.

Tuesday’s record, meanwhile, came as the Mediterranean islands of Cyprus and Malta were given the green light to adopt the euro on January 1, 2008, swelling the ranks of the euro currency club to 15 members.

But the foreign exchange market is particularly focused on interest rate differentials, weakening currencies from countries with low interest rates, such as the yen, and boosting currencies from areas with higher borrowing costs, such as the eurozone and Britain.

While the Fed is likely to keep its benchmark Fed funds rate unchanged at 5.25 per cent over the coming months, the European Central Bank appears poised to lift its refi rate to 4.25 per cent in September.

The Bank of England is expected to raise interest rates to 6.00 per cent from 5.75 per cent before the end of 2007.

In comparison, the Bank of Japan has left its key lending rate unchanged at 0.5 per cent since February amid fresh falls in consumer prices.

On Tuesday, the European single currency — which was created in 1999 - beat its previous record peak of $1.3682, set on April 27, ahead of Bernanke’s speech.

“There is speculation that the Fed may question the health of the US jobs market ... is the market holding up as well as recent data suggests?” said Audrey Childe-Freeman, analyst at the Canadian Imperial Bank of Commerce.—AFP