The dollar suffered overnight amid growing expectations that the US economy is facing further difficulties, with rising energy prices and ebbing consumer confidence unsettling investors.

Standing at 1.2268 to the euro this morning at 10:00 (GMT), the dollar also fell against the pound to 1.8115.

Energy prices remain volatile in the US in the wake of Hurricane Katrina, while weaker than expected manufacturing data from Philadelphia and New York accentuated concerns for the economy.

However, while many are anticipating medium-term difficulties, Rabobank market strategist Jeremy Stretch told Reuters he was confident the dollar would ultimately ride out interim economic turbulence.

"The market is a bit nervous before consumer confidence data and there could be a jump in the current account deficit," he acknowledged.

"All September data is likely to be weaker after the hurricane but this won't substantially change the long-term view of the US economy," he added.

Analysts are now awaiting today's new figures from a University of Michigan study on consumer confidence, which is expected to reveal a fall from last month's numbers.