The euro broke through the US$1.38 mark Friday for the first time, as persistent worries about the strength of the U.S. economy pushed the European currency higher.

The 13-nation euro moved as high as US$1.3811 in afternoon European trading before falling back to US$1.3805. That was up from US$1.3783 in New York late Thursday.

The dollar, which has been under pressure all week, fell after the U.S. Commerce Department reported that retail sales in June fell by 0.9 percent compared with the previous month. That was its biggest drop since August 2005, and came as demand for cars, furniture and building supplies plummeted.

U.S. economic data are being scrutinized closely for hints on the U.S. Federal Reserve's future interest rate course.

The Fed has left its benchmark rate unchanged at 5.25 percent for a year after two years of steady increases.

That contrasts with the course of the European Central Bank, which has raised rates steadily and is expected to do so again to 4.25 percent in September. The Bank of England last week increased its benchmark rate to 5.75 percent, a six-year high.

Higher interest rates, a weapon against inflation, can bolster a currency by giving better returns on fixed-income investments.

Concerns about the strength of the U.S. economy, fueled largely by woes in the subprime housing sector, have boosted the euro against the dollar.

Higher interest rates and the economic slowdown have lead to more defaults in subprime mortgages, which are loans to borrowers with weak or spotty credit histories.

The British pound continued to trade around 26-year highs against the dollar Friday. On Friday, it rose to US$2.0343 from its level late Thursday of US$2.0304.

The dollar slipped to 122.24 Japanese yen from 122.41 yen.