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Euro Hits All-Time High

The dollar also falls against the pound.

The greenback was falling to an all-time low against the euro Wednesday on the back of strong economic data in Europe and continuing worries about the health of the U.S. economy.

Euros were selling for $1.3892, up from $1.3836 late Tuesday. The British pound was buying $2.0372, up from $2.0323 a day earlier.

The

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exchange-traded fund, which tracks the value of euros, was trading higher by 0.4%, while the

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, which tracks the pound, was barely changed in recent market action.

"There was stronger than expected industrial production data out of the European Union," says Win Thin, a senior currency strategist at Brown Brothers Harriman in New York.

The upbeat data should help the European Central Bank keep euro interest rates high relative to dollar rates as it tries to battle inflation, while the

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Federal Reserve

seems almost certain to cut rates at its Sept. 18 meeting, he adds.

Foreign-exchange investors tend to choose currencies based on interest rate yields, so expectations of a rate cut by the Fed but not the ECB would make the euro more attractive relative to the greenback.

Adding to the mix were comments by Treasury Secretary Henry Paulson that the crisis in the mortgage market could drag on for a while. However, he said the trouble in the financial realm wasn't caused by any problems in the "real economy," but was the result of bad lending.

Turing to Asia, Japan's prime minister Shinzo Abe announced he would resign, making at least some observers uneasy about that nation's currency.

"We see that the growing political uncertainty in Japan is a yen negative for two reasons," writes the London-based foreign exchange strategy team at Barclays Capital in a market brief. "It will see the economic reform process in Japan slow even further, and the political uncertainty will make Bank of Japan Governor Fukui less eager to raise rates."

Dollars were trading for 114.3 yen, up marginally from 114.26 yen previously.

The

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was off slightly.