Dollar Falls Against Yen on Bets Fed Will Lower Rate 0.75-Point

The dollar fell for a sixth straight day against the yen and traded near a record low versus the euro as traders increased bets that the Federal Reserve will lower interest rates by 0.75 percentage point this month.

The U.S. Dollar Index, which compares the currency with those of six trading partners, dropped as futures showed a 74 percent likelihood the Fed will reduce rates to 2.25 percent. Last week, traders saw no chance of a cut that steep. Canada's currency fell after the Bank of Canada cut rates today to help offset a slump in exports to the U.S.

The dollar will remain under pressure, said Omer Esiner, an analyst at currency-trading company Ruesch International Inc. in Washington. The U.S. economy is looking weak.

The dollar fell to 103.08 yen at 9:10 a.m. in New York, from 103.49 yen yesterday, when it fell to 102.62 yen, the lowest since Jan. 28, 2005. The U.S. currency traded at $1.5202 per euro, from $1.5204 yesterday, when it touched $1.5275, the weakest level since the European currency's 1999 debut.

Don't fight the dollar weakness, a team of strategists at Zurich-based UBS AG, led by Mansoor Mohi-uddin, wrote in a research report published today. This week's U.S. data will likely increasingly suggest a recession, they wrote.

The U.S. Dollar Index traded on ICE Futures in New York was at 73.584 after declining to a record low of 73.354 yesterday. The slump in the U.S. currency helped push the price of oil to a record of $103.95 yesterday and gold to an all-time high of $989.54 an ounce.

`Grossly Misaligned'

The yen advanced to 156.71 per euro from 157.35.

UBS Wealth Management Research, a unit of UBS, wrote in a separate report that the world's foreign-exchange markets are grossly misaligned and Asian currencies may appreciate sharply.

The Singapore dollar reached S$1.3897 against the U.S. currency, a decade-high, before trading at S$1.3904, from S$1.3910 yesterday. The Taiwan dollar advanced 0.6 percent to NT$30.922 per dollar.

The Australian dollar, also known as the Aussie, fell as the central bank governor said there is evidence consumer spending is moderating. The central bank raised the main rate to 7.25 percent today, the highest in 12 years. The Aussie was at 93.29 U.S. cents, from 93.96 cents yesterday and 94.98 on Feb. 28, the highest since March 1984.

The Australian dollar is likely to be sold hard in the near-term, Hans-Guenter Redeker, head of currency strategy in London at BNP Paribas SA, one of the world's 10 biggest currency traders, wrote in a note to clients. A support level at 92.75 cents per dollar looks set to be broken, he said.

`Anxious to Sell'

The dollar may fall below 100 yen in one or two months as Japanese investors lose confidence in dollar-denominated assets, Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp. in Tokyo, wrote in a research note.

Futures on the Chicago Board of Trade show investors have raised wagers on deeper rate reductions since Fed Chairman Ben S. Bernanke suggested last week the central bank was ready to lower borrowing costs further to bolster the economy.

A lot of traders are anxious to sell the dollar, said Hiroshi Yoshida, foreign-exchange trader in Tokyo at Shinkin Central Bank. The U.S. economy looks weak.

The U.S. currency may fall to 102 yen this week, he said.

The euro gained 15 percent against the dollar in the past year, eroding the competitiveness of European exports. The synthetic euro, which estimates the European currency's value before its inception in 1999, yesterday rose to the strongest level since at least January 1989, when Bloomberg's data on the measure began.