exchange rate

THE euro hit a record high against the dollar today benefiting from the latest crisis in the American financial sector.

The single currency rose to 1.6038 dollars according to Reuters. Around 9:25 GMT, it traded around 1.6020 dollar. The previous record of the euro, registered on April 22, was 1.6018 dollar.

The dollar's slump came just two days after the U.S. government had tried to restore confidence with a rescue package for mortgage agencies Freddie Mac and Fannie Mae.

Sterling eased against the euro on today.

Inflation poses a big headache for the B of E as its ability to curb prices with interest rate rises is limited by slowing growth, a potentially painful mix for the economy and thus for sterling.

Sterling was back on the defensive against the euro this morning as the "feel good" effect of surprisingly strong retail sales figures started to fade, with little change seen to UK monetary policy outlook.

The pound rallied on Thursday after figures showing UK retail sales surged 3.5% last month, the fastest pace since the series began in
1986,putting them up 8.1% on the year.

The startling data, which also boosted British retail shares, fanned talk that the B of E might have scope to raise interest rates from the current 5%.

Sterling fell heavily against the euro on Thursday,with the B of E's decision to leave borrowing costs at 5% eclipsed by the European Central Bank saying a euro area hike might come as soon as July.
The single currency was on track for its biggest one-day percentage gain since mid-April after ECB President Jean-Claude Trichet shocked markets, saying a hike had been discussed ahead of its decision to hold its interest rates at 4%.

Sterling rose slightly this week after a smaller than expected fall in UK retail sales and factory orders suggested that the B of E may put off cutting interest rates in coming months as it tackles rising inflation risks.

Sterling hit a five week high versus the Euro this morning as weak UK housing data was overshadowed by a large euro/sterling sell order, which traders said had a disproportionate market impact due to low liquidity.