Traders said the euro's spike against the dollar Tuesday was mainly due to expectations that the European Central Bank would continue to raise interest rates in 2007.

The euro was trading at 1.3275 dollars at 2100 GMT, up from 1.3197 dollars late on Friday in New York. The European currency had, however, surged as high as 1.3297 dollars in earlier trading, its highest level since December 8, before receding somewhat.

The dollar meanwhile was changing hands at 118.81 yen, down from 118.96 yen late on Friday, the US markets were closed Monday due to the New Year holiday.

There was no fresh US economic news Tuesday driving the dollar's fortunes, although Wednesday will see the release of the minutes from the last Federal Reserve interest-rate setting meeting.

The Fed has kept its key fed funds short term interest rate pegged at 5.25 percent since August.

Market-watchers are likely to pore over the minutes for any hints about future interest rate moves.

The euro has soared over 11 percent against the dollar in the past 12 months as the world's largest economy has cooled, largely amid a housing market downturn.

In late New York trade, the dollar stood at 1.2131 Swiss francs after 1.2191 Friday.

The pound was being traded at 1.9736 dollars from 1.9596.

The Tokyo and Singapore markets were closed Tuesday for New Year celebrations.

Meanwhile, another report from London adds: The euro struck a near three-week high against the dollar and all-time peaks against the yen and Swiss franc in European trade on Tuesday.

The euro hit as high as 1.3288 dollars in early European exchanges on Tuesday, the highest point since December 13, 2006.

During the course of 2006, the euro gained 11.4 percent against the dollar, 12.0 percent against the yen and 2.7 percent against the Swiss franc.

Analysts believe the principal driver of the foreign exchange market last year had been differences in interest rates across economic zones.

Interest rates in the US have been held steady since last August at 5.25 percent, giving momentum to the European currency in recent months, while recent data in Japan has dampened expectations of another rate hike there.

The euro is meanwhile now being used by 13 countries after Slovenia became on Monday the first former communist state to join the European Union's common currency.