Source AP ©

Dollar falls again

The dollar stumbled to fresh lows against the euro and pound on Friday with little economic news to distract currency traders from the struggling U.S. housing market.

The euro rose to a record $1.3842 in late New York trading, surpassing its previous high of $1.3833 on Wednesday, before falling back to $1.3822. That still was up from $1.3803 late Thursday.

Britain's pound climbed to a new peak of $2.0586 before dropping back to $2.0549, above Thursday's $2.0486. The pound has been trading at its highest level against the dollar since 1981.

The dollar fell against the Japanese currency to 121.24 yen from 122.06 yen the day before.

In other New York trading, the dollar bought 1.2013 Swiss francs, down from 1.2032 late Thursday, and 1.0479 Canadian dollars, up from 1.0431.

A string of negative reports on the U.S. housing market has weighed on the dollar in recent weeks. Federal Reserve Chairman Ben Bernanke renewed housing concerns Wednesday in his testimony to the U.S. Congress, warning that a worse-than-expected housing market downturn could drag down the economy.

Some risky mortgage lenders already have been forced out of business due to a spike in foreclosures and delinquencies on subprime mortgages, which are made to borrowers with poor or spotty credit history.

A narrowing interest rate gap between the United States and Europe also has steadily undermined the dollar. Concerns have deepened that the rise in the 13-nation euro could harm Europe's economy in the long term.

The U.S. Fed has left its benchmark rate unchanged at 5.25 percent for a year after two years of steady increases. Meanwhile, the European Central Bank has raised rates steadily and is expected to do so again, to 4.25 percent in September, helping propel the euro higher.

The Bank of England last week increased its benchmark rate to 5.75 percent, a six-year high, and inflation figures in Britain released this week raised the likelihood of another hike.

Higher interest rate hikes, a weapon against inflation, can bolster a currency by giving better returns on fixed-income investments.

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