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Dollar Gains on Euro, Yen as U.S. Economic Activity Rises

The dollar inched higher against the euro Monday after a new report said that U.S. economic growth was set to pick up slightly despite misgivings about the housing market.

The 13-nation euro rose as high as $1.3507 before slipping back in afternoon European trading.

The British pound was up against the dollar.

The dollar gained strength after a gauge of future U.S. economic activity inched up in July, according to the Conference Board's index of leading economic indicators, which reported a 0.2 percent rise in July, less than the 0.4 percent analysts were expecting.

The index fell 0.3 percent in June, after rising 0.2 percent in May.

The report came after the U.S. Federal Reserve on Friday cut the discount rate, the interest it charges on its loans to banks, in its most dramatic effort to calm global financial markets roiled by a widening credit crisis.

The decision means that the discount rate will be lowered to 5.75 percent, down from 6.25 percent. However, the Fed did not change its target for the more important federal funds rate, which has remained at 5.25 percent for more than a year.

By contrast, the European Central Bank and Bank of England have been raising their rates, but speculation is growing that the ECB, which had been expected to raise its key rate to 4.25 percent in September, may hold off until markets are more settled.

Higher interest rates, a weapon against inflation, can support a currency by offering investors better returns on investments denominated in it.

The dollar was higher against the Japanese currency on Monday, moving up to 114.93 yen from 114 yen after the Bank of Japan added 1 trillion yen ($87.3 million) to money markets, coming on top of a 1.2 trillion yen ($104.8 million) injection on Friday.

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