The euro came within half a cent of record highs against the dollar today as European policymakers reiterated a hawkish monetary policy stance and jitters on the health of the US economy persisted.
Sterling fell 0.5 per cent to $1.9680 and hit a record low of 80.65 pence per euro after the Royal Institution of Chartered Surveyors' British house price survey showed the lowest reading in its 30-year history.
"This is a clear signal that things in the housing market are getting worse," said Ian Stannard, senior foreign exchange strategist at BNP Paribas. "The mid-term trend in sterling is to remain lower."
The euro has risen around 9 percent versus both sterling and the dollar since the start of the year.
Concern about the health of the US economy, and fresh doubts about credit markets, are overshadowing support for the dollar from the Group of Seven financial leaders' strongest expression in seven years about volatility in major currencies, traders said.
The euro meanwhile was boosted by the European Central Bank's continued inflation focus, which analysts reckon will prevent it from cutting rates for a few more months.
ECB Executive Board member Juergen Stark and Governing Council member Miguel Angel Fernandez Ordonez stressed the bank's commitment to price stability in separate comments today.
The head of Germany's ZEW economic institute said he would recommend the ECB not to lower rates this year after the current conditions component of its economic sentiment index rose.
"The euro zone ... is set to remain on hold (on rates) in the near term and that's supporting the euro," said David Pais, currency strategist at Citi.
"Investors are nervous ahead of bank earnings with markets waiting to see how big writedowns are and how bad things are."
Results from Merrill Lynch and Citigroup are due later in the week, with analysts expecting both to announce billions of dollars in bad debt write-downs.
By 11.08am the euro was steady at $1.5845, within sight of the record high of $1.5912 hit last week according to Reuters data, and recovering from a post-G7 low of $1.5669.
With French EU-norm inflation jumping to a record 3.5 per cent year-on-year last month, the data should keep ECB rhetoric hawkish, analysts say.
ECB President Jean-Claude Trichet and Governing Council member Axel Weber attend a book launch at 4pm (Irish time).
The dollar edged lower to 100.97 yen, and the euro also fell slightly to 159.90 yen.