Euro trades close to fresh dollar record

LONDON (AFP) - The euro soared close to a fresh record against the dollar yesterday as the US currency came under heavy pressure on fears for the health of the US economy.

The single European currency in late European trading was at 1.3806 dollars after 1.3803 late Wednesday in New York. But the euro at one point surged to 1.3831 dollars, just shy of its record 1.3833.

The dollar meanwhile was trading at 122.10 yen against 121.94 on Wednesday.

The US currency suffered as traders interpreted Wednesday's comments by US Federal Reserve Chairman Ben Bernanke as less than reassuring.

Bernanke said the problems encountered by the sub-prime loan sector of the US housing market were likely to get worse before they got better, adding that there was a risk that the "prolonged downturn in the housing sector could spill over into consumer spending."

Sub-prime loans provide mortgages to people with poor credit histories, often allowing them to buy homes beyond their means.

Analysts at BNP Paribas said Bernanke's comments revealed "a significant change in tone from the Fed, where previously Bernanke and other Fed members had attempted to play down the problems in sub-prime, describing them as 'contained'."

The Fed chief on Thursday however said the housing sector had not yet had a major impact on US consumer spending.

A broad measure of future US economic activity meanwhile posted a worse-than-expected decline in June, the Conference Board reported.

The business research group said its index of leading economic indicators fell 0.3 percent in June. Most economists had expected the widely-tracked gauge to decline a more modest 0.1 percent.

Conference Board economist Ken Goldstein said the latest readings suggested the world's biggest economy could soften during the second half of the year despite hopes of an economic pickup.

"While the economy has weathered the negative impact of the housing slump and the increases in gas and grocery prices, these negative factors continue to hold down growth in consumer and investment activity," Goldstein said.

Later Thursday, the Federal Reserve is to release the minutes from its last interest rate meeting on June 28.

Elsewhere, the pound weakened after softer-than-expected retail sales figures for Britain, hurt by the recent rises in borrowing rates and poor weather, eased the likelihood of an interest rate hike next month by the Bank of England.

The Office for National Statistics reported that June retail sales rose by 0.2 percent from May in seasonally adjusted terms, a slowdown from 0.4 percent in May and missing analyst expectations for an unchanged reading.

The euro was changing hands at 1.3806 dollars, against 1.3803 dollars late on Wednesday, 168.59 yen (168.35), 0.6739 pounds (0.6721) and 1.6607 Swiss francs (1.6571).

The dollar stood at 122.10 yen (121.94) and 1.2029 Swiss francs (1.2005).

The pound was being traded at 2.0491 dollars (2.0529).

On the London Bullion Market, the price of gold climbed to 673.45 dollars per ounce from 666.75 dollars late on Wednesday.