Dollar hovers near the brink

THE dollar lurched lower, hitting its worst levels for 2 1/2 years against 'safe-haven' currencies. The danger is that investors' disillusion with the US economy might push it into freefall.

Sterling climbed to $1.4670, but fell against others, including the euro, which was playing the unfamiliar role of a strong currency. It rose to 94 US cents, close to its highest for 16 months. It topped 64p against sterling. The 17.9% surge in UK house prices reported by Nationwide had little effect on the pound.

Tensions in Kashmir and the Middle East kept the markets jittery. Gold remained strong, easing to $324.65 an ounce early on in London, but recovering to $326.

The European Commission expects modest economic growth for euroland in the June quarter at between 0.3% and 0.6%. But it is doubts about the dollar that is driving the markets. The euro is up 7% in US terms since April. The dollar is at 2 1/2-year lows against the yen and the Swiss franc, although the Japanese and Swiss central banks have tried to stop its fall.