The dollar rose against the euro and seemed poised to touch a one-year high after the US Senate passed a $700 billion rescue package for the troubled finance sector.

The dollar climbed to $1.3963 per euro on October 2, at 7:45 a.m. in London from $1.4009 late Wednesday in New York. The latest rise was very near to the $1.3882 which the dollar had touched three weeks ago and which had been the strongest in almost a year since September 18, 2007. The dollar also registered a marginal rise against the yen, reaching 105.75 yen on October 2, from the last exchange rate of 105.71 yen.

The latest rise in dollar rates came in the wake of the passage of the finance rescue bill in the Senate which was seen as evidence of US acting faster than Europe to address the seizure in credit markets. A gain in the US currency was also believed to be the result of greater demand for dollar funding outside the country as banks have become increasingly reluctant to lend to each other. According to reports, foreign banks are paying hefty premium rates, almost the highest in a decade, to borrow dollars in the swaps market despite the Federal Reserve increasing funds to $620 billion for easier availability to other central banks,