LONDON: The dollar rose against the euro and yen on Thursday as concerns grew about Europe's mounting debt strains, dealers said.

In morning London deals, the euro fell to 1.4712 dollars from 1.4726 late in New York on Wednesday.

Against the Japanese currency, the dollar climbed to 88.22 yen from 87.88 yen on Wednesday.

The European currency's fall came a day after Standard & Poor's lowered Spain's credit rating outlook to "negative" from "stable."

"Growing concerns over credit-rating cuts for European countries are prompting investors to keep selling the euro," Mitsubishi UFJ Trust and Banking Corp chief manager Hideaki Inoue told Dow Jones Newswires.

Greece and Portugal had their credit rating outlooks slashed on Monday by Standard & Poor's, which voiced pessimism over both countries' capacity to strengthen their public finances and reduce debt.

"Expect more to come as sovereign risk concerns and fiscal deficit remain in focus," said Calyon analyst Mitul Kotecha.

Investors also had their eyes turned to Bank of England monetary policy decisions due at 1200 GMT.

The Bank was expected to maintain its key lending rate at a record-low level of 0.50 percent and decide against pumping fresh funds into the banking system to aid the British economy, which has been slow to escape recession.

Ahead of the central bank's announcements, the British pound was up against both the dollar and euro.

Iceland's central bank cut its benchmark interest rate by one percentage point to 10 percent on Thursday as the country's battered economy slowly recovers, it said.

The bank, which was to detail the reasons behind its decision later Thursday, also lowered its deposit rate a half-point to 8.5 percent.

Iceland's once-booming financial sector ground to a halt in October 2008 when the country's major banks collapsed after borrowing beyond their means to fund aggressive investments abroad.

Thousands of Icelanders saw their savings wiped out, unemployment soared and the Icelandic krona plunged in value.

In London on Thursday, the euro was changing hands at 1.4712 dollars against 1.4726 dollars late on Wednesday, at 129.79 yen (129.43), 0.9043 pounds (0.9054) and 1.5113 Swiss francs (1.5117).

The dollar stood at 88.22 yen (87.88) and 1.0273 Swiss francs (1.0261).

The pound was at 1.6268 dollars (1.6259).

On the London Bullion Market, the price of gold fell to 1,125.70 dollars an ounce from 1,141 dollars late on Wednesday.