The dollar dropped against the yen today, as many experts predict a new US government report may show that inflation has levelled out.

This morning the dollar stood at 1.2071 against the euro and at 1.7606 to the pound.

If tomorrow's report suggests that inflation in the US is at last under control, many market speculators will view it as an indication that interest rate rises are at an end.

The Federal Reserve has raised the interest rate 13 times since June 2004 and sets the rate at 4.25 per cent.

"The US is almost finished raising interest rates,'' Uwe Parpart, a senior market strategist with Bank of America, told Bloomberg.

"The interest rate advantage will not disappear, but it will no longer push the dollar up.''

The dollar rose by 14 per cent against the euro and the yen during 2005.