TOKYO -- The dollar rose in Asian trade Monday on growing speculation about interest rate cuts in Europe to shore up flagging economic growth there, dealers said.

Sterling meanwhile fell below $1.85 for the first time in more than two years, hit by mounting concerns about the health of the British economy.

The dollar climbed to 110.25 yen in Tokyo morning trade from 110.01 in New York late Friday. The euro slipped to $1.4736 from $1.4779 and to 162.43 yen from 162.61.

"The euro remains weak as fears of a slowdown in the eurozone economy are lingering and a downturn in crude oil prices is fuelling speculation of an early rate cut by the European Central Bank," a trader told Dow Jones Newswires.

"Many players appear to be keen to buy back the dollar."

The pound was under pressure after official figures released on Friday showed that the British economy stuttered in the second quarter with its weakest performance for 16 years.

"The pound is very weak as anaemic UK data have been sparking fears about the economy and speculation over an early rate cut by the BOE has been growing," said another trader.

The pound was changing hands for $1.8426, down from $1.8519 in New York on Friday.

The market was still digesting remarks made Friday by Federal Reserve chairman Ben Bernanke, who appeared to signal steady US interest rates despite economic headwinds and financial sector problems.

"Along with the fall in the price of oil, the reduced likelihood of interest rate hikes boosted US consumer stocks and industrials, which supported the dollar," NAB Capital strategists wrote in a note to clients.

However, traders were cautious ahead of a batch of economic indicators due to be released in the US this week on the housing sector, consumer confidence and second-quarter economic growth, dealers said.

They were also watching developments surrounding Lehman Brothers following a report that the Korean Development Bank is considering a takeover of the investment bank, which has been hit by the credit crunch.