The dollar slid to its lowest in months against most major currencies Friday, after weak U.S. factory data reinforced expectations of a cut in benchmark interest rates next year.

The greenback slumped to a 14-year low against the British pound and a 20-month low against the euro after the Institute for Supply Management's survey of national manufacturing in November showed its key index at the lowest since April 2003, at 49.5. A reading under 50 indicates a contraction. .

Friday's report compounded concerns about a slowing in the U.S. economy, following data on Thursday that showed business activity in the Midwest shrank in November for the first time in 3-1/2 years.

"There's no reason to buy dollars, especially versus European currencies," said Thierry Elias, head currency trader at Banque Natexis Populaires in New York. "We had Chicago PMI yesterday, and the ISM report this morning is pointing to slower economic growth in the U.S. It just supports the mentality that has been in place for the past 10 days, and that is: sell dollar."

Sterling rose to $1.9847 , the second straight day it has reached its highest since September, 1992 — just before Britain abandoned the European Exchange Rate Mechanism, the precursor to the euro. Investors are looking for sterling to rally to the $2 level, last reached in September 1992.

The pair last traded at $1.9831, up 0.9 percent.

The dollar fell to a 20-month low against the euro for an eighth straight day. The euro peaked at $1.3348, moving closer to its record high of $1.3667 hit in December, 2004, before easing to $1.3342, up 0.8 percent.

Euro/yen touched a record high of 154.11 yen, according to EBS.

The dollar fell to a three and a half month low against the yen at 114.95 yen , according to Reuters data. The pair last traded at 115.08 yen.

Dollar/Swiss franc fell to an 18-month low at 1.1899 francs. The pair last traded at 1.1906.

The dollar could keep weakening because of imbalances in the U.S. economy but was unlikely to suffer an abrupt fall, EU Economic and Monetary Affairs Commissioner Joaquin Almunia said Friday.

Federal Reserve chairman Ben Bernanke did not discuss the economy or the outlook for inflation or interest rates Friday in brief remarks at a conference on monetary policy.