The euro strengthened against the dollar following suggestions that the European Central Bank would raise interest rates in the new year.

This morning the dollar stood at 1.1865 to the euro, while the single currency was at 1.4510 to the pound.

ECB council member Guy Quaden told Belgian magazine Trends-Tendances that further hikes in the rate on the back of this month's adjustment could not be ruled out.

"I can't guarantee that interest rates will stay eternally at their current low levels,'' he said.

Earlier this month the ECB raised rates for the first time in five years, setting the interest rate at 2.25 per cent.

Elsewhere, the US economy was buoyed by news that US consumer confidence hit a new high post-Hurricane Katrina.

A dip in petrol price and resurgence in the US job market saw the Conference Board's index of consumer confidence rise to 103.6 points in December, up from 98.3 in November.