The dollar fell slightly this afternoon as inflation data from the US proved in line with expectations.

This afternoon the dollar was at 1.7475 against the pound and at 1.1903 to the euro.

Results from the personal consumption expenditure index (PCE) released by the Commerce Department showed that prices were steady.

The index, which records key prices against consumer spending, showed rose by 1.8 per cent in January in comparison to 2005 - echoing a similar 1.9 per cent gain seen in December.

Boston-based Investors Bank & Trust analyst Tim Mazanec told Reuters that the findings had not been earth-shattering.

"People are watching the year-over-year core PCE inflation figure of 1.8 percent and that is not enough to change the debate over the Fed, so the dollar has remained fairly steady - ever so slightly weaker after this number," he said.

"Looking ahead, the course of the dollar may be largely dictated by the course of inflation and the Fed's reaction."

Last week the Labour Department in the US released data showing consumer prices had risen by 0.7 per cent in January.

The news had prompted some observers to predict the Federal Reserve would stick with its strategy of raising the rate to combat inflation, although the trajectory of the interest rate remains a source of debate.