The euro came close to an all-time high against the dollar yesterday as bad news about the US economy affected end-of-day trading. At a rate of $1.3653, the euro ended the day just under a December 2004 peak exchange rate of $1.3670.

According to data released yesterday, the number of new homes sold in the US last month was 2.6 per cent higher than in March 2006, but this was short of market expectations.

On Tuesday, sales of existing homes suffered their biggest fall in 18 years.

At the beginning of last year the euro was trading at just over $1.18, close to its value on the day it was founded.

Since then, continuing strength in the economies of Asia and Europe, coupled with fears that the US economy is overdependent on the property market, have caused investors to reassess the currencies' long-term prospects.

Leading German industrialist Matthias Kraemer of the BDI industry group said there was "still no reason" for alarm about any competitive impact on exports in the euro zone's largest economy. His comments came as the Ifo Institute's latest business climate index indicated that German firms are shrugging off the stronger euro and expectations of higher interest rates to report growing confidence in their outlook.

US short-term interest rate futures - financial derivatives whose prices move in the opposite direction to expected interest rate changes - rose in value, suggesting that investors have raised their expectations that interest rates will be cut this year.

Analysts said this trend could increase the chance of the dollar falling further on world currency markets.