Page last updated at 20:00 GMT, Tuesday, 26 August 2008 21:00 UK

Dollar increases against the euro

Money changer with dollars and euros
The dollar has benefited from gloomy times in Europe

The dollar has climbed back to a six-month high against the euro, as continuing fears about the European economy hit the single currency.

With a key German business sentiment survey posting its worst reading in three years, the euro fell as low as $1.4571 in Tuesday trading.

Data showing that the German economy contracted from April to June, also increased European recession fears.

Meanwhile, the pound fell to $1.8331, its lowest point since July 2006.

However both currencies rallied a little in later trading.

Deteriorating outlook

"The German [business confidence] number suggests that the risk of a full-blown recession in Germany is rising as the last time the number plunged to this level, Germany was in recession," said analyst Dustin Reid of ABN Amro in Chicago.

The US currency has benefited as the economic outlook has darkened in both mainland Europe and the UK.

Investment guru Warren Buffett said last week that he had no bets against the dollar - underscoring the currency's strength. The fall in the euro and sterling could help European exporters whose goods will now be cheaper overseas.

But it will hurt holidaymakers who have benefited from a strong pound when travelling to countries which use the dollar.

While the dollar resumed its rises on Tuesday, oil prices also climbed on fears that disruption would be caused by hurricanes in the Gulf of Mexico.

US light, sweet crude climbed $1.16 to close at $116.27 a barrel while in London, Brent crude added 60 cents to settle at $114.63.

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