Euro rises to record high vs. sterling SAN FRANCISCO (MarketWatch) -- The dollar pared its losses against most major rivals Monday, as stocks and commodities investors curbed their initial enthusiasm about China's stimulus package. The dollar index , a measure of the greenback against a trade-weighted basket of six major currencies, fell to 85.977 from 86.280 in late North American trading on Friday. But it was well above its session low of 85.064. Weekend news of the package lifted equity markets around the world and revived risk appetite, which in turn weighed on the lower-yielding Japanese yen and U.S. dollar. The yen, and to a lesser degree the dollar, have served as barometers of risk aversion in global financial markets, gaining when fears are running high. Deleveraging and liquidation in the face of financial turmoil sharply boosted both currencies in October. Bouts of renewed but modest risk appetite have left the two currencies somewhat under pressure since the start of November. The Chinese government outlined a plan to spend around $586 billion over the next two years. Read more. The effort "could well form the starting point of a coordinated fiscal-stimulus plan as world leaders gather in Washington later this week," wrote strategists at Lloyds TSB. U.S. stocks initially headed higher after the news, led by energy and material companies, on expectation of increased demand for commodities. But Wall Street dipped back into red ink in afternoon trading, with major indexes finishing solidly lower. See Market Snapshot. Crude futures also reversed course as traders reassessed the Chinese stimulus steps, after climbing as much as 7% early in the session, but crude futures did manage to recover and close higher. See Futures Movers. Some investors remained hopeful in the glow of the Chinese move, which could prove to be a defining moment in the crisis, wrote Neil Mellor, currency strategist at Bank of New York Mellon. "But even if this optimistic scenario ultimately proves to be correct, the inevitable and continued deterioration in global economic data may prove to be a rather overwhelming test of the market's mettle in the meantime," Mellor said. Euro hits record vs. pound The dollar slipped to 97.93, down from 98.17 yen late Friday. The euro rose to $1.2750 from $1.2712 Friday, but off a session high of $1.2925. The British pound slipped to $1.5616 from late Friday's $1.5646, off a Monday high of $1.5883 after it came under cross-trading pressure as it lost ground against the euro. The euro was up 0.5% at 81.65 pence, after earlier rising to 82.07 pence -- its highest level since the united European unit began trading in January 1999. "The figure would be the highest since 1996 when using the Deutsche mark for a synthetic representation of the euro," said Ashraf Laidi, chief foreign exchange strategist at CMC Markets US. U.K. interest rates are now below those in euro zone for the first time since the euro began trading, with the former at 3.25% and the latter at 3%. Last Thursday, the Frankfurt-based European Central Bank lowered its key borrowing rate by half a percentage point to 3.25%, as forecast. The Bank of England, on the other hand, exceeded forecasts with a move on the same day. It slashed its key interest rate 1.5 percentage points to 3%, considerably more than the half-percentage point cut anticipated by many analysts. The euro could carry further fundamental momentum against the pound to reach as high as 82.50, according to Laidi.

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