The US dollar reached a record four-year high against the euro on Tuesday amidst concerns that banks in Europe would face the spectre of further loan losses next year as the continent's economic outlook seemed to get worse by the day.

The surging American currency also posted a higher value against its Canadian counterpart following the Bank of Canada's move to raise its key interest rate, which is the first initiative coming from a Group of Seven nation since the financial downturn engulfed the whole world.

The euro dipped to $US1.2112 by the start of trading on Tuesday but eventually settled to $US1.2253 as the European Central Bank announced on Monday that loan losses would continue until 2011 in spite of earlier estimates that loan write-downs for the continent's bank system would increase in 2010.

Debt-ridden European countries were forced to adopt austerity measures this year to follow mandates being enforced by the European Union, resulting to about 15 percent decline of the euro against the dollar as investors shifted to cautious mode on the continent's economic prospect.

Adding to the current woes is China's sluggish manufacturing sector in May, which highlighted concerns that the Asian manufacturing and export industries have been overly dependent on demands coming from Europe and around the world.

Meanwhile, investors have received an advisory from Brown Brothers Harriman that at this point, no currency is insulated from the rising risk of aversion as the US currency shed some of the gains it has acquired following reports that construction and manufacturing growths are fuelling a recovering US economy.

Investors usually rally to the US dollar as their safe haven as the UK pound increased to $US1.4658 while the Japanese yen declined to 91.24 against it, with the Canadian dollar losing a bit at 1.0457 when its central bank increased key interest rate by a quarter point.

Also, current delivery of gold settled at $US1,224.80 per troy ounce on the New York Mercantile Exchange, coming from the $US1,212.20 it posted Friday last week.