The dollar dropped against the euro and other currencies yesterday, following speculation over a halt in interest rate hikes.

This afternoon the dollar was at 1.7208 against the pound and at 1.1785 to the euro.

Many analysts interpreted minutes from the US Federal Reserve's meeting on November 1st as indicating a possible end to rate increases that began in June 2004 and currently stand at four per cent.

The minutes hinted that policy makers are worried about the possibility of resurgent inflation.

Richmond Federal Reserve President Jeffrey Lacker insisted to reporters that is was too early to say that rate increases were over, as inflation is still a risk among solid growth.

However, Uwe Parpart, a strategist at Bank of America in Hong Kong told Reuters the initial signs were clear.

"There's very little doubt going into next year that the end of the Fed's tightening will weigh on the dollar," he said.

"The question is when will this become significant."