You might save on vodka, but little else comes cheaply in Moscow

London climbed three places to second in Mercer Human Resource Consulting's 2007 Cost of Living study.

Asian cities Seoul, Tokyo and Hong Kong completed the top five. Paraguay's capital Asuncion was the cheapest.

The report measures the cost of 200 items such as housing, clothing and food in 143 cities on six continents.

The most expensive place to rent a luxury two-bedroom unfurnished apartment was Tokyo, at £2,110 per month, and the cheapest Johannesburg, at just £490.

And while a coffee in Moscow will set you back £3.14, in Buenos Aires it will cost less than £1.

The high cost of accommodation and a favourable exchange rate against the US dollar were the key factors behind Moscow's continued dominance of the annual cost-of-living survey, Mercer said.

It was a similar story in London, where property rental prices and the weakening US dollar saw the British capital rise from fifth place in 2006.

Mercer senior consultant Rebecca Powers said there had been significant changes since the 2006 rankings of the annual survey.

"These are primarily due to exchange rate fluctuations - in particular, the weakening of the US dollar and strengthening of the Euro," she said.

Across Europe, a stronger Euro pushed up the premium paid to live in many countries, notably Germany and Spain. Six European cities were in the top 10.

Israel's largest city, Tel Aviv, was found to be the priciest city in the Middle East, with a ranking of 17th (up from 24th in 2006).

Cities in the United Arab Emirates such as Dubai and Abu Dhabi slumped largely because their currency is pegged to the ailing US dollar, Mercer said.

Dollar's decline

Asia had four of the top-10 most expensive cities in the rankings, with the Japanese city of Osaka taking eighth place. Australia's largest city, Sydney, was the most expensive in Oceania, taking 21st place.

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In Africa, the most expensive place to live was Cameroon's largest city, Douala, which ranked 24th.

Zimbabwe's capital, Harare, was excluded from the survey this year. It is caught in a spiralling economic crisis, with the world's highest inflation rate of 3,714%.

In North America, you will still have to fork out for a bite of the Big Apple - New York was again the most expensive city, but it dropped five places to 15th. Other US cities also experienced sharp falls.

"The change reflects a reversal of the situation experienced this time last year, when the majority of US cities climbed the ranking due to the strength of the dollar," Ms Powers said.

In South America, Sao Paulo (62nd) and Rio de Janeiro (64th) were the most expensive places to live, but both slumped by more than 20 places each.

Asuncion in Paraguay was the cheapest of the 143 cities ranked for the fifth year in a row.

It was joined by Pakistan's largest city, Karachi (142nd), and Ecuador's capital, Quito (141st), at the bottom of the table.

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