Euro rallies, but under pressure from fighting in Georgia

In morning deals, the European single currency stood at $1.5065 after touching $1.4907 in Asian trade. That was the lowest point since February 26 and compared with $1.5013 late in New York on Friday.

Against the Japanese currency on Monday, the dollar slid to 109.73 yen from 110.11, after earlier striking 110.39 -- the highest level since January.

"Many players regard the unrest in Georgia as a new reason to sell the euro as Europe relies heavily on Russia for oil supplies," said Satoshi Tansho, a dealer at Chuo Mitsui Trust Bank.

Georgia does not produce oil but the country is a key transit point for crude and gas exports from Azerbaijan to markets in Western Europe.

Russia kept up its attacks on Georgia on Monday despite mounting international pressure for a ceasefire.

Meanwhile, the Russian ruble has fallen sharply against the dollar as dealers eyed the developing conflict.

"Any further ruble weakness at present looks temporary," said ING analyst Stanislav Ponomarenko, cited by Dow Jones Newswires.

"We see no direct impact on Russia's economy from further development of the conflict in South Ossetia," he added.

In Asian trading earlier on Monday, the dollar had hit a seven-month high point against the yen amid signs the U.S. economic slowdown was spreading to other major economies.

High-yielding currencies such as the Australian dollar and the British pound also fell heavily in earlier Asian trade on Monday.

Sterling sank to $1.9110 -- which was the lowest level since November 2006 -- before bouncing back to $1.9247 in European trade.

Dealers added that the euro was dampened by fading prospects of an interest rate rise by the European Central Bank (ECB) amid growing concerns about the health of the eurozone economies.

The U.S. currency has fallen heavily over the past year as the Federal Reserve slashed interest rates to shore up the U.S. financial markets and economy in the face of a housing slump and credit crunch.

But with concerns now growing that the eurozone and Japan could be heading for recessions, there is speculation that the greenback may have reached a turning point.

In London trade on Monday, the euro changed hands at 1.5065 dollars against 1.5013 late on Friday, at 165.46 yen (165.35), 0.7836 pounds (0.7812) and 1.6209 Swiss francs (1.6239).

The dollar stood at 109.73 yen (110.11) and 1.0747 Swiss francs (1.0816).

The pound was at $1.9247 (1.9209).

On the London Bullion Market, the price of gold rose to $882.05 per ounce from $852.50 late on Friday.