The euro rose to a two-week high against the dollar on Wednesday - its first day of trading as a physical currency - while speculation over euro entry in the UK and Sweden sparked sharp moves for sterling and the krona.

The single currency rose to a high of $0.9066 against the dollar, before easing to $0.9041 by 1540 GMT. It closed at $0.8910 in New York on Monday.

Analysts said the credibility won by the eurozone authorities from the apparently successful launch was boosting the single currency.

Against sterling, the euro bounced more than 2 per cent to a one-month high at £0.6280, its biggest-ever one-day move against the pound. It closed at £0.6118 against the single currency in London on Monday.

Most of the move could be attributed to the euro's strength following its introduction as a physical currency, said Chris Furness, senior currencies strategist at 4cast consultancy in London.

"Speculators said to themselves that the eurozone leadership cannot let the euro weaken in the first days after the launch," said Mr Furness.

But sterling was also hit after comments by Peter Hain, the UK's minister for Europe, that market participants interpreted as favourable to the UK's entry into the eurozone.

Mr Hain warned the UK could not play a decisive role in Europe if it stayed permanently outside the eurozone, and hinted that Gordon Brown, the chancellor of the exchequer, could make his assessment of the criteria for membership before the June 2003 deadline.

In Sweden, speculation about a referendum on euro entry in the autumn sent the krona to a four-month high against the single currency.

While sterling would need to weaken against the euro before joining, Swedish authorities would like a stronger krona, analysts say, to combat inflation.

"Given the range of the krona in the past two years, the authorities would like to see the krona below, or close to, SKr9 before it joined the euro," predicted Nick Parsons, global head of FX research at Commerzbank.

In the last two years, the krona has traded between SKr8.05 and SKr9.96 to the euro. It reached Kr9.2 on Wednesday, its highest point since August, before easing to SKr9.2780. The Swedish currency also hit a four-month high against sterling at SKr14.8599.

The Argentine peso looked to have moved ever closer to a devaluation against the dollar after the central bank announced the ending of requirements enacted last month forcing banks to accept the peso at parity for dollar-denominated debt and allowing interchangeable transfers between pesos and dollars in accounts in the same bank.

The peso has been pegged one-to-one with the dollar for the past decade under Argentina's Convertibility plan, but analysts say a devaluation is almost inevitable, given the country's four year long recession.

Eduardo Duhalde, Argentina's fifth president in two weeks, has already hinted he would scrap the peg, but analysts are divided over whether the government, wary of further civil unrest, will allow a free float or will try and control the move.

"A free float would be the easiest to do, but in Argentina's case it could well result in more chaos in th short term and as we've seen, Argentine society has very little stomach for more economic pain," said Carl Ross, head of sovereign research at Bear Stern. "But a controlled float requires credibility, and that is something Argentina is definitely lacking."

Mr Ross said a free float could push the peso to as much as two-to-one against the dollar in the short-term before the rate settled down.

"Free floats almost always overshoot in the short term," he warned.