The dollar rose to the highest level in five weeks versus the euro after investors judged the Federal Reserve may pause cutting interest rates.

The U.S. currency climbed after the Fed lowered its benchmark rate a quarter-percentage point to 2 percent yesterday and said the seven rate reductions since September were ``substantial.'' The pound climbed to the highest level in more than a month against the euro, helping to boost the dollar, after the Bank of England said the worst of the credit crisis in the U.K. may be over.

``The Fed's statement erred on the hawkish side and showed an inclination to pause in cutting rates,'' said Kamal Sharma, a currency strategist in London at JPMorgan Chase & Co. ``Having said that, the Fed didn't actually close the door on further rate cuts. The moves in the market today are also influenced by thin liquidity during a holiday.''

The dollar rose to $1.5528 by 6:19 a.m. in New York, from $1.5622 yesterday. It touched $1.6019 per euro on April 22, the lowest level since the 15-nation currency's launch in 1999. The dollar was little changed against the yen at 104.20. The euro fell to 161.52 yen from 162.36.

The dollar rose 4.2 percent against the yen and 1.1 percent versus the euro in April. It's down about 7 percent against both currencies this year. The euro gained 3.2 percent versus the yen last month, paring this year's loss to 0.5 percent.

Thin Trading

Trading volumes may be less than normal today due to public holidays in Singapore, Hong Kong, Switzerland, and most European countries, said Sean Callow, a senior currency strategist in Sydney at Westpac Banking Corp., Australia's fourth-largest bank. ``I expect very thin trading today,'' he said.

The difference in yield, or spread, between two-year German notes and equivalent U.S. Treasuries has narrowed to 1.46 percentage points from a record high of 1.85 points at the end of March.

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