The European currency was trading around 17-month highs against the U.S dollar at $1.5088 on Tuesday as worries about Dubai's debt problems eased, while rising stock and commodity prices dimmed the greenback's safe-haven allure.

The British pound advanced against the U.S dollar and the EUR as house prices rose for a 7th month and Dubai World began talks with banks, easing concern a delay in debt payments will hurt U.K. lenders. The U.K. currency rose to $1.6621 from $1.6440 yesterday. The Sterling strengthened to 90.86 pence per EUR, from 91.25 pence.

The GBP climbed even as an index compiled by the Chartered Institute of Purchasing and Supply and Market Economics showed U.K. manufacturing expanded last month less than economists predicted. Morgan Stanley said that U.K is likely to limp out of recession, certainly relative to its global peers.