LONDON (AFX) - The euro remained higher against the ailing dollar in midday trade after surging through the key 1.01 level, as the slide in US equities looked set to continue unabated, dealers said. In midmorning trade US futures turned sharply lower after unsubstantiated rumours circulated the market that a major US investment house has run into liquidity problems. "The dollar is coming under the kosh yet again," Will Rugg, senior currency strategist at Standard & Poor's, said. "The rumours are unsubstantiated but they are hitting the panicky market hard," said Will Rugg, senior currency strategist at Standard & Poor's. A dealer at another leading investment bank, who asked not to be named, said the rumour was being put around by salespeople at a loss to explain the recent selloff. "It's just a reason salespeople are giving their customers to explain the selloff that the banks analysts can't understand," he said. The euro surged higher after it pierced its overnight high of 1.0089 (against the dollar) and US equity futures turned lower, Kamal Sharma, currency strategist at Commerzbank, said. However, the euro's gains against the dollar were capped by strong buying interest in the Swiss franc, Rugg said. Currently the futures market points to the DJIA opening down 159.00 at 8,503.00. Meanwhile, the dollar fell to a 17-month low against the yen in midmorning trade, but fears that the Bank of Japan would intervene to weaken the yen failed to materialise. "If they've held off up to now, they'll probably keep away," Paul Bednarczyk at 4Cast said. He said the slump in dollar-yen to a low of 115.48 was largely down to "silly rumours" circulating about the major US investment bank. However, he said the market was not too concerned about the fall, given that dollar-yen slumped to similar levels yesterday. Dollar-yen briefly fell below 115.50, touching 115.48, before returning to hover back above the 115.50 level. Bednarczyk said Federal Reserve chairman Alan Greenspan will have his work cut out this afternoon if he is to calm the jittery market when he testifies before the Senate at 3.00 pm. "It's an unenviable task ... things are looking pretty hairy," he said. Against the backdrop of broad dollar weakness, sterling-dollar remained well bid after UK June CPI data revealed that RPI-X, the government's preferred measure of inflation, declined on a monthly basis for the first time since November 2001.