The dollar slumped against major currencies Tuesday with the euro surging to an all-time highs on optimism about the outlook for the European economy and concerns about growth in the United States, according to dpa. While the euro jumped to a record 1.3735 dollars during afternoon trading in Europe, the pound hit a 26-year high of 2.0231 dollars. The greenback also edged down to 122.38 yen. The euro was at 1.3722 dollars as European trading came to an end Tuesday. The euro's rise against the dollar came amid concerns about the US economy as a result of an upheaval in its housing market, falling productivity, the nation's trade deficit and renewed inflationary pressures. The common currency's previous record of 1.3682 dollars was set in April this year. Since then, economic data has continued to point to the 13-member eurozone remaining on a growth track and shaking off slowing US economic growth. While the Fed left borrowing costs unchanged last month at 5.25 per cent, the European Central Bank appeared to prepare the ground at its meeting last week to deliver another rate hike in September, which would lift the ECB's benchmark refinancing rate to 4.25 per cent. This would represent the ECB's ninth rate rise since the bank launched its current rate-hiking cycle in December 2005. "The area is at the moment the only one of the major economic regions of the world where a rate rise is not expected," said Carsten Fritsch, currency analyst with Commerzbank AG. At the same time, strong UK retail sales data have added to expectations that the Bank of England will press on with raising rates after announcing last week that it was raising rates in Europe's second biggest economy to 5.75 per cent. The ECB's signal last week that it was considering another rate increase in September after raising the cost of money by 25 basis points in June sent the euro up to an all-time high against the yen of 167.38. However, the euro's climb has also helped to rattle investors concerned about the impact of the currency's rise on the 13-member's key export machine. By late afternoon trading Tuesday the pan- Eurostoxx50 index was down 1.2 per cent. After making its debut on world forex markets at 1.18 dollars in January 1999, the euro dropped about 25 per cent over the following 18 months or more as concerns set in about the currency bloc's economic outlook and as Europe's political leaders battled to reach consensus on reform. The common currency hit a record low of 0.8252 US cents in October 2000. Euro notes and coins were introduced in January 2002.
