Dollar soars to 20-month high; euro drops vs yen

asr: this is also a reason for week GOLD today at 770

asr: author below says Europe has more problems than US from stock mkt. point of view

NEW YORK (Reuters) - The dollar climbed to its highest since February 2007 against a basket of currencies on Tuesday as investors bet that interest rates outside the United States will fall sharply to shore up global growth.

Concerns over the global economy's health lured investors away from stocks into the safe havens of the dollar, yen and Swiss franc. The Federal Reserve launched a new facility to provide liquidity to strained financial markets, which analysts said unnerved investors by highlighting continuing problems.

Analysts say aggressive interest-rate cuts by the Fed and a possible stimulus package put the U.S. economy in a better position to recover relative to others around the world.

Sterling fell below $1.6700 for the first time since November 2003, according to Reuters data, after Bank of England Governor Mervyn King said on Tuesday that Britain's economy is probably entering its first recession in 16 years.

"Most importantly, the market is starting to shift its focus back to the underlying economic fundamental story, which is a dollar-positive story," said Omer Esiner, senior market analyst at Ruesch International in Washington.

"It suggests that the interest-rate differentials will continue to be in the dollar's favor. The global economy is falling and lending rates abroad have more room to the downside than in the U.S. It suggests that the dollar's relative yield appeal will continue to improve."

The ICE Futures U.S. dollar index climbed as high as 84.460 .DXY, its highest since February 2007, according to Reuters data. The index, which measures the greenback's value against a basket of six currencies, was last up 1.6 percent at 84.320.