LONDON, 8 November 2007 — The dollar tumbled yesterday to fresh lows against the euro, with already cautious sentiment hit by reports China might diversify its massive forex reserves away from the US unit, dealers said.

They said reports, however unclear, that China, with its $1.4 trillion in forex reserves, could be ready to cut its dollar holdings only added to the litany of negative news on the beleaguered US currency.

Record prices for oil, apparently driven by speculative money flows as much as supply concerns, along with a near-record for gold, helped stoke fevered sentiment against a backdrop of worry over the fallout from the collapse of the US subprime or higher risk home loan market.

The euro hit an all-time high of 1.4731 dollars in midday European trade before falling back to 1.4665 dollars, still well up from 1.4555 in New York late on Tuesday.

Against the British pound, the dollar hit new 26-year lows at 2.10 dollars, the highest level since 1981.

The price of gold also jumped higher in early trade, hitting $845 an ounce to be within touching distance of its all-time peak of $850 set in January 1980.

The Reserve Bank of Australia yesterday raised its benchmark rate by 25 basis points to 6.75 percent, increasing the currency’s yield advantage.

The Canadian dollar reached an all-time high yesterday versus the US greenback.

Overnight, the loonie, a sobriquet given to the Canadian dollar, was being traded overseas for more than 1.1000 US dollars, while the American dollar slipped to only 0.9091 Canadian dollars.

The Canadian currency had gained almost two cents in less than 24 hours, before retreating slightly to 1.0920 US dollars at 10:20 a.m. local time (1520 GMT).

Meanwhile, European stock markets closed lower yesterday. London’s FTSE 100 index lost 0.85 percent at 6,420.10 points. In New York, the Dow Jones industrial average was down 174.12 points, or 1.27 percent, at 13,486.82. The Standard & Poor’s 500 Index was down 20.85 points, or 1.37 percent, at 1,499.42. The NASDAQ Composite Index was down 39.32 points, or 1.39 percent, at 2,785.86.