The dollar remained on the back foot after tame US inflation data yesterday led to speculation that the Federal Reserve is nearing the end of its long cycle of interest rate hikes. "Yesterday's slug of weaker US claims and manufacturing sentiment data and benign CPI helped further curtail Fed tightening expectations," said Daniel Katzive at UBS. "With markets still pricing two further Fed rate hikes, we think this rate adjustment could have further to go if data continues to soften in the weeks ahead as our economics team suspects," he added. The US rate hiking cycle has taken the benchmark rate to 4.50 pct from as low as 1 pct in May 2004. Still, the dollar may find some reprieve in data due out today with US industrial production and the University of Michigan sentiment survey predicted to post strong readings. In any case, the euro is expected to remain well bid as investors are becoming increasingly optimistic on the outlook for euro zone interest rates. Many feel that the European Central Bank could continue raising rates into next year. The euro rose sharply across the board, trading just below the seven-week high of 1.2191 level reached against the dollar late yesterday, as well as gaining sharply against major currency crosses. The single currency surged to seven-month highs against the pound, nine-month highs against the Australian dollar and traded close to 2-year highs against the Swiss franc. Meanwhile, the pullback in US and global growth expectations has weighed separately on commodity currencies. The Australian, New Zealand and Canadian dollars were all lower across the board and among the few currencies to fall against the US dollar. At the same time, the yen benefitted from the fall-out given the low interest rates in the country. The yen was higher across the board. Elsewhere, the pound kept its gains on the dollar but weakened slightly against the euro -- largely due to the fortunes of the non-UK currencies. There was little by way of domestic leads to influence the pound but fading hopes of a Bank of England rate cut in the coming months has kept the currency well bid over the past week. UK data has been largely mixed, suggesting that the Bank of England will continue with its wait-and-see approach.