SINGAPORETOKYO, Sept 1 Reuters The dollar gained ground against the euro and sterling on Thursday after earlier hitting a 24year peak against the Japanese yen, as investors positioned for higher U.S. interest rates and remained concerned about the health of European economies.

The euro slid 0.37 to just hold above parity against the dollar at 1.10016, while the pound hit a fresh twoandahalf year low of 1.15545 down around 0.5, as the safehaven dollar was supported by moves away from riskier assets.

The U.S. dollar index , which measures the greenback against a basket of currencies, was up 0.34 at 109.09, not far off its twodecade high of 109.48 hit on Monday.

Even after hitting fresh records, USD strength has scope to extend somewhat further, boosted by the global slowdown and the European energy crunch in particular, said analysts at Generali Insurance Asset Management.

Manufacturing activity across the euro zone shrank for a second month in August, according to a survey, mirroring a slump in factory activity around the world, and while European energy costs have softened slightly this week, they remain at highly elevated levels.

The Japanese yen, earlier in the day, slid to as low as 139.69 yen per dollar , its softest since 1998, before paring its losses. The dollar was last up 0.24 higher at 139.3 yen.

The main driver remains rate differentials between Japan and the U.S., and even today39;s price action just follows the overnight move higher in U.S. rates. We…