Courtesy of FT.com:

By Richard Beales in New York

Published: November 30 2006 18:42 | Last updated: November 30 2006 21:40

The dollar suffered sharp falls on Thursday, hit by reports of weak US business activity and a benign inflation picture.

The euro rose 0.7 per cent against the dollar to $1.3247 by late afternoon in New York after data from Chicago purchasing managers indicated that business activity in the Midwest unexpectedly fell last month.

Sterling rose to its highest level against the dollar since its ejection from the European Exchange Rate Mechanism in September 1992. The pound rose as high as $1.9699 before edging back to $1.9658, almost 1 per cent up on the day. The yen also gained, rising 0.5 per cent against the dollar to Y115.77.

A report revealed that inflation in personal consumption expenditure excluding food and energy, the Federal Reserve’s preferred inflation benchmark, held steady in October at 2.4 per cent year-on-year. The data suggested further inflation-fighting interest rate rises by the Fed, which could support the dollar, were even less likely to be needed.

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