The euro went on another record-setting run against the US dollar on Friday, smashing past US$1.42 for the first time as traders focused on tame inflation and weak US consumer sentiment reports.
Analysts said tepid US economic data reinforced a growing conviction that the US Federal Reserve would continue cutting interest rates to help shore up a struggling US economy.
The euro traded at high as US$1.4278, before settling at US$1.4266 at 9pm GMT compared with US$1.4150 late on Thursday in New York. The US currency retreated to ?114.80 from ?115.57 a day earlier.
The US currency has been under heavy selling pressure since last week's decision by the Fed cut benchmark US interest rates by half a percentage point.
The US Commerce Department earlier Friday reported that its key inflation gauge, the personal consumption expenditures price index, had fallen 0.1 percent last month and showed a 1.8 percent rise over the past 12 months, its weakest showing in three-and-a-half years.
Core inflation, which excludes volatile food and energy costs, rose 0.1 percent last month and came to only 1.8 percent in the past year.
The inflation data overshadowed news that US consumer spending rose a better-than-expected 0.6 percent last month.
"The weaker core figure means the Fed has more scope to ease rates further," Orlando Green at Calyon said. Lower interest rates reduce the attractiveness of the dollar to investors.
By contrast, the European Central Bank, the guardian of the euro, looks set to continue its monetary tightening bias and is not expected to cut interest rates any time soon.
David Rodriguez at Forex Capital Markets said the US dollar's losses accelerated after the University of Michigan survey on consumer sentiment index fell to 83.4 this month from a preliminary reading of 83.8. It was the latest soft reading on consumer confidence, a harbinger of spending trends.
"The headline number printed at its worst since August of 2006 on fears of a continued housing recession -- its first year-over-year drop in five months," Rodriguez said.
In late New York trading, the dollar stood at 116.33 Swiss francs from SF1.1732 on Thursday.
The pound was being traded at US$2.0470 from US$2.0274.
The Canadian dollar broke past parity with its US counterpart, trading as high as US$1.0080 before settling later at US$1.0075.
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