December 03, 2006	Sunday	Ziqa'ad 11, 1427

NEW YORK, Dec 2: The greenback's decline deepened on Friday, with the euro breaching $1.33 and the British pound hitting 14-year highs, after US manufacturing contracted in November.

The euro hit its highest levels since March 2005 to stand at $1.3337 around 2200 GMT, compared with $1.3241 in New York late on Thursday.The European currency hit an all-time high of 154.11 to the Japanese yen.

The dollar fell to 115.43 yen, from 115.77 late on Thursday.

Sterling surged to $1.9802 from 1.9657, striking its highest levels since the pound was ejected from Europe's Exchange Rate Mechanism in 1992.

The Institute for Supply Management's index of US manufacturing activity dropped to 49.50 from 51.2 in October, falling below the 50 mark to indicate contraction in the sector for the first time since April 2003.

IDEAGlobal currency strategist Divyang Shah said the fall below 50 was pivotal because it could end all remaining talk of further interest rate hikes from the Federal Reserve.

The significance of this level comes from the fact that the Fed has never hiked interest rates when the ISM has been below 50.0, and thus dampens significantly concerns over the recent hawkish rhetoric from the Fed, he said.

The dollar had already suffered prior to the ISM data release, owing to a report that suggested the European Central Bank is willing to tolerate sharp gains in the single currency's exchange rate.

Analysts cited a report quoting an unidentified ECB official as saying that the eurozone economy could sustain a much sharper rise in the euro's rate to 1.40-1.45 dollars, with some suggesting it could go beyond 1.50 dollars.

If you tell them it's okay to buy euros and pounds, then they buy euros and pounds. It's not that hard to understand.Among other currencies, the Australian dollar also hit a 20-month high against the US dollar of 0.7928.

The yen suffered on weak Japanese inflation data.

Japan's core consumer price index rose by 0.1 per cent in October from a year earlier, below expectations for a 0.2 per cent rise and supporting the view that the Bank of Japan will raise interest rates later rather than sooner.

Busch said the dollar's decline would intensify, reflecting a yawning US trade deficit and the end to a long run of Fed rate hikes.—AFP