updated 10/3/2005 4:11:14 PM ET 2005-10-03T20:11:14

The dollar rose to the highest level against the euro in almost three months Monday amid confidence over the U.S. economy and prospects of rising interest rates.

Major Market Indices

The 12-nation euro stood at $1.1909 in late New York trading, down from $1.2018 in New York late Friday. That was its lowest since July 5, when it dipped to $1.1868.

The British pound also dropped to $1.7540 from $1.7633. The dollar was up against the Japanese currency, rising to 114.20 yen from 113.60 yen. The dollar rose to 1.3026 Swiss francs from 1.2911, and fell to 1.1649 Canadian dollars from 1.1700.

The U.S. economy has weathered the impact of Hurricane Katrina better than forecast, economic reports Monday showed. Meanwhile, the latest inflationary measures came in higher than expected — bolstering expectations that interest rates will continue to rise. Higher rates boost the appeal of assets denominated in particular currency.

The Institute for Supply Management said its manufacturing index advanced to 59.4 percent in September from 53.6 percent the month before, for the industrial sector’s 28th consecutive month of growth.

But manufacturers reported another sharp jump in prices last month as higher crude oil costs and transportation problems caused by the hurricanes boosted input costs. The price index rose to 78 percent in September, a 15.5 percentage point rise from 62.5 percent in August, the institute said. The price index had jumped 14 percentage points the month before.

Even a better-than-expected purchasing managers’ index from the euro zone Monday failed to lift the euro. The dollar rose against the yen after the Bank of Japan’s quarterly survey of corporate sentiment fell short of expectations.

“The fact that these moves occurred despite better-than-expected European data underscores the fact that U.S. developments — primarily higher U.S. yields and general dollar momentum — are more important drivers in the market at present, rather than European developments,” Robert Lynch, a currency strategist at HSBC in New York, wrote in a research note.

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