The move looks set to clear the way for an historic Judiciary Committee vote next week over Mr Clinton's relationship with Monica Lewinsky and his efforts to cover up the scandal.

The decision to drop the fund raising investigation comes just two days after Republicans announced they were expanding their inquiry to take in the president's re-election campaign.

Probe will refocus on Mr Clinton's affair

A federal judge allowed one Democratic and one Republican committee member to view secret internal Justice Department memos on the finance issue on Wednesday.

But Judiciary Committee chairman Henry Hyde said they had concluded there was nothing to follow up.

The committee, which will now focus on the Lewinsky scandal, is expected to approve at least one article of impeachment against Mr Clinton - likely to be a charge of perjury.

Voting on articles of impeachment is likely to be at the end of the week with the matter going to the full House the following week.

Washington correspondent Paul Reynolds says most observers now think the committee will vote along party lines to impeach Mr Clinton.

But he says the votes are still not assured in the House despite its Republican majority.

Censure motion

There is also renewed talk of a motion to censure the president instead.

Mr Hyde has dropped the finance inquiry

New York Republican Peter King, who opposes impeachment, says he has been discussing with up to 20 moderate Republicans a possible censure alternative.

The motion would strongly condemn Mr Clinton's actions over his relationship with Ms Lewinsky and would impose a financial penalty on him. It also would require a statement by the president admitting wrongdoing.

My Hyde and incoming House Speaker Bob Livingston are both keen to wrap up impeachment proceedings by the end of the year.

But Mr Livingston would not say if he would allow a vote on the House floor to censure the president.