MercoPress. South Atlantic News Agency

US dollar in new record low against the Euro and Sterling

The dollar fell on Tuesday to a record low against the Euro and a 26-year low against the British pound as investors feared that the deteriorating U.S. sub-prime mortgage market could eventually slow the economy.

On this background the Euro reached 1.3738 US dollars, its highest level against the dollar since the 13-nation currency started trading in 1999, before retreating to 1.3729. That was still above the Euro previous high of 1.3682 reached on April 27 and the 1.3623 it bought late Monday in New York. In late New York trading, the pound was changing hands at 2.0267 US dollars, up from 2.0151 late Monday in New York. The dollar also fell against the Japanese currency, drifting to 122.03 yen from 123.33 yen. The dollar's latest fall came after the key Standard & Poor's credit rating agency said it may downgrade 12.1 billion US dollars in sub prime mortgage debt. Sub prime mortgages are increased-risk loans given to borrowers with a poor credit rating or those on low incomes. House repossessions in the sector have reached record highs this year. Both the Euro and the sterling have also benefited from recent interest rates rises by the European Central Bank (ECB) and the Bank of England. While the ECB has kept Eurozone rates on hold at 4% this month, they have doubled in 18 months, and more rises are expected by the end of the year. The Bank of England last week increased rates to 5.75%, and most analysts expect a further rise before the end of the year, as both it and the ECB move to slow inflation. US interest rates were kept on hold at 5.25% following the Federal Reserve's most recent rate-setting meeting last month. It was the eighth time in succession that the Fed had left rates unchanged. Also Tuesday, a speech by U.S. Federal Reserve Chairman Ben Bernanke in Cambridge, Mass., offered little insight into the central bank's next move, and instead focused on how the Fed makes its inflation-fighting decisions. In related news oil prices climbed to an 11-month high above 76 US dollars a barrel on Tuesday as rising global oil demand and North Sea field maintenance exacerbated supply worries. London Brent crude soared to an intraday high of 76.34 US dollars a barrel, edging closer to the record high of 78.65 struck August last year as experts said the market outlook remained tight for the near term. Brent, currently seen as a better global benchmark than US crude, was up 13 cents to 75.75 a barrel by 1.33pm in New York. US crude fell 66 cents to 72.15 a barrel on expectations refinery outages in the Midwest would depress demand. "The oil price is at very high levels for good reasons and there's every possibility we could see further strength in coming months" said David Dugdale, an analyst at MFC Global Investment Management.