Euro gains ground against the dollar (AP) (18-03-2008)

BERLIN (AP) -- One day after rising to an all time high of $1.5904, the euro crept higher against the dollar on Tuesday, as traders were awaiting the decision from the U.S. Federal Reserve Bank for the U.S. interest rates.

The European currency was worth US$1.5772 in morning European trading, well below the high of US$1.5904 it set on Monday, but above the US$1.5731 it bought in late New York trading the night before.

The Fed meets Tuesday and analysts are predicting that the central bank could reduce its benchmark rate by as much as 100 basis points, some of which is already priced in, according to some analysts.

The European Central Bank, by comparison, has left its own rate at 4 percent as inflation in the 15-nation euro zone hit another record high last month.

Lower interest rates can jump-start a nation's economy, but can also weigh on its currency as traders transfer funds to countries where they can earn higher returns.

The dollar was still lower against the Japanese yen, buying 97.58 in morning trading, above the 12-year low of 95.77 it fell to on Monday, and slightly above the 97.13 it bought in New York in late trading.

The British pound rose against the dollar, edging higher to US$2.0067 from US$2.0020 on Monday.

Source: AP