The dollar extended its rally on Friday, hitting a nearly 2-year high against the pound and gaining further against the euro, amid troubling signs about the global economy. The dollar has soared against a number of currencies over the past month, most notably the euro. The 15-nation currency slid to $1.4713 in New York from $1.4803 late Thursday. It has fallen more than 13 cents from its high of $1.6038 set on July 15.The British currency retreated to its lowest level since October 2006, sinking to $1.8629 from $1.8685 the previous session.

The dollar also climbed against the Japanese yen, rising to ¥110.49 from ¥109.77 late Thursday.The dollar's newfound strength had a ripple effect across commodity markets as well, as the price of gold and oil declined in Friday trading. The dollar has climbed in recent weeks as the economic outlook outside the United States has worsened. Figures published by the European Union Thursday revealed that the eurozone economy contracted by 0.2% in the April-June period, raising recession fears.

Earlier this week, the United Kingdom said unemployment is on the rise and inflation will continue to soar to 5%. As a result, the government hinted that interest rates may have to be lowered to prevent the country from entering a recession. The European Central Bank and Bank of England both decided to hold interest rates steady last week to support economic growth, instead of raising them to combat inflation. And the latest figures suggest that rate cuts could be coming sooner rather than later.

Continued at Yahoo Finance