The euro rose to a 20-month high against the dollar yesterday as the US currency continued in the doldrums and EU policy-makers played down the euro's strength.

The euro rose to $1.3181 yesterday before falling back 0.2 per cent, while the pound rose to a 24-month high of $1.9480, while trading at £0.6752 against the euro.

French ministers had voiced concern about the rise of the euro on Monday but analysts read as significant the fact that they were alone among single-currency finance ministers.

Austrian finance minister Karl-Heinz Grasser dismissed the currency's recent strength, saying that it was "nothing special at all" and an indication of a strong EU economy.

The eurozone economy remained highly liquid despite five rate rises over the past two years, Calyon economist Stuart Bennett told the Financial Times.

"Liquidity continues to pose an upside inflation risk, supporting the view that the European Central Bank will hike rates in December and further in 2007," he said.