LONDON, Sept 5: The dollar fell sharply against the euro on Wednesday after figures showed turmoil in the US mortgage market pushed pending home sales in July down to their lowest level in almost six years.

The euro rose to $1.3667, from $1.3607 in London late on Tuesday.

The dollar fell to 115.17 yen, from 116.34 yen late on Tuesday.

Against the backdrop of volatile markets, the European Central Bank was widely forecast to freeze eurozone borrowing costs at 4.00 per cent on Thursday; and the Bank of England was predicted to hold its key rate at 5.75 per cent.

But the ECB said on Wednesday it was ready to counter any volatility on the euro money markets, triggering speculation it may indeed raise its key interest rates this week after all.

Peter Wadkins, of Thomson IFR Markets, said the central bank’s announcement “increases the likelihood that the ECB will not proceed with the rate hike alluded to back in early August.”

Attention will focus on Thursday on ECB President Jean-Claude Trichet’s accompanying comments for clues about the likelihood and timing of future eurozone rate changes.

The euro was changing hands at $1.3667, against $1.3607 late on Tuesday, 157.39 yen (158.29), 0.6760 pounds (0.6758) and 1.6441 Swiss francs (1.6488).—AFP