Euro falls on prospect of ECB rate cuts

The dollar hit a near six-month high against the euro Friday on speculation that the European Central Bank would begin cutting interest rates next year to boost the shrinking eurozone economy.In morning trade, the European single currency sank as low as 1.4698 dollars-the lowest point since February 20. It later stood at 1.4716, down from 1.4824 late in New York on Thursday.The dollar rose to 110.58 yen from 109.66 after earlier touching 110.66 -- a high against the Japanese currency last seen in January. The greenback regained the key 110-yen level after a spike in US consumer price inflation sparked talk of Federal Reserve interest rate hikes, which could make the dollar more attractive to investors. Investors will focus later Friday on upcoming economic data in the United States, including the University Of Michigan consumer confidence survey and the latest reading on industrial production. "This survey could give some hints if US consumers are able to drag the economy out of the mud," Ulrich Leuchtmann, a currency strategist with Commerzbank in Frankfurt, told Dow Jones Newswires.The euro began sliding against the dollar on Thursday after it emerged that the eurozone economy contracted 0.2 percent in the second quarter, rekindling speculation that the European Central Bank may have to lower borrowing costs to shore up flagging growth.While the ECB is unlikely to move this year, "they will eventually start cutting rates from the early part of next year and that will be a key factor which will contribute to more euro weakness," predicted David Mann, currency strategist at Standard Chartered in Hong Kong. "We probably have seen the top of the euro at 1.60," although the euro was unlikely to tumble below 1.40 dollars in the near future, he said."We're not convinced that we will see any interest rate hikes in the US this year, which will ultimately disappoint the markets," added Mann. Elsewhere, the British pound continued to struggle against the dollar in morning trade. Sterling slumped to 1.8512 dollars-the lowest point since July 2006 -- after the Bank of England issued a gloomy economic outlook earlier this week.