Euro coast USD1.4383 in European trading

The euro backed away from U.S. dollar on Tuesday, retreating from its all-time high set a day before even as markets anticipated a likely quarter-percent rate cut by the U.S. Federal Reserve Bank this week.

Photo: Euro coast USD1.4383 in European trading

The 13-nation euro bought US$1.4383 in early morning European trading, down from the US$1.4424 in late trading in New York on Monday. It was also off its all-time high of US$1.4438 on Monday.

Markets expect the Fed to cut interest rates from their current level of 4.75 percent on Wednesday - adding to an unexpectedly bold half-point cut last month.

Although lower interest rates can jump-start the economy, they can weaken a currency as investors transfer funds to countries where their deposits and fixed-income investments bring higher returns. Higher rates can boost a currency.

The euro has been climbing steadily against the dollar, regularly touching new highs since August amid fears over the health of the U.S. economy - worries stoked by the subprime credit crisis and increasingly disappointing economic reports.

The euro's rise, which makes goods from the U.S. much cheaper to buy, can hurt exports from countries that use the currency, among them Germany and France.

On Tuesday, the British pound bought US$2.0575, down from US$2.0619, its highest point since July, on Monday. The dollar fell against the Japanese currency, too, slipping to 114.43 yen from 114.59 yen.