The dollar has hit a six-month high against the euro and reached the highest in almost two years against the pound.

According to the BBC News, “the U.S. currency has bounced back from record lows against euro on fears that European growth may slow sharply.”

Great Britain is also struggling with high inflation and faltering growth, causing a slide in sterling.

On Tuesday morning, the European currency hit a six-month low of $1.4812, while the pound hit a 21-month low of $1.9012.

Even though the U.S. economy is still suffering from the credit crisis, analysts say the deteriorating outlook elsewhere in the world has buoyed the currency’s standing.

The U.S. currency has also been helped by the falling price of commodities that are priced in dollars. To protect against dollar weakness, investors had bought oil and gold, but they are unwinding those positions.

The military conflict in Georgia has further undermined the euro, which could disrupt European markets. Nevertheless, analysts cautioned that the dollar’s rally might not be sustainable.

Julian Jessop, chief international economist at Capital Economics, is quoted by the BBC as saying, “the scope for a much faster recovery in the dollar is still limited by relatively poor economic fundamentals in the U.S.”

To read the entire article from the BBC News, link here:

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