The dollar posted further gains after yesterday's US budget proposal for 2006 satisfied the market that fiscal restraint is at the top of the government's agenda.
The news fuelled further gains for the dollar, which has been on a firm upward path since Friday when Federal Reserve chairman Mr Alan Greenspan said he expects the US current account deficit to narrow.
At 11.06 a.m. the euro was worth $1.2734 up from $1.2759 and £0.6878 sterling, up from £0.6872.
The dollar strenthened particularly against the yen, reaching near eight-week highs. The euro stabilised below the $1.28 mark after reaching three-month lows against the dollar yesterday.
The 2006 US budget plans a heavy clamp-down on non-military, domestic spending, with the budget deficit forecast to fall steadily towards $251 billion, or 1.7 per cent of GDP, by 2008.
But analysts warned the budget forecasts do not contain any provisions for war or further building of oil reserves, or the costs associated with the government's plan to create private Social Security accounts.
Elsewhere, the pound remained weak against the dollar, though held onto recent gains against the euro after news overnight of a strong rebound in UK retail sales in January.