The U.S. currency also declined versus the British pound as futures traders bet the Fed will cut borrowing costs by half a percentage point to 0.5 percent at its next meeting, compared with the U.K.'s benchmark rate of 3 percent. A Labor Department report today may show U.S. unemployment rose to a five-year high as the global economic slowdown worsened.
The dollar fell to 97.22 yen at 7 a.m. in New York, from 97.75 yesterday in New York. It weakened to $1.2758 per euro from $1.2715. The euro was little changed at 124.29 yen. Against the pound, the dollar declined to $1.5730 from $1.5627. The dollar may fall to $1.31 versus the euro in the next week and rebound to $1.17 by year-end, Stannard said.
The dollar fell 0.3 percent against the euro this week. The pound lost 2.2 percent against the U.S. currency over the five days as the Bank of England yesterday reduced its main rate to the lowest level since 1955. The euro fell 1 percent against the yen this week after the European Central Bank lowered rates by half a point to 3.25 percent.
The Australian and New Zealand dollars declined 33 percent against the yen this year as the threat of a global recession reduced demand for the countries' commodity exports. The Baltic Dry Index, a measure of shipping costs for bulk freight, slumped more than 90 percent since Jan. 2.
The pound declined this week versus the dollar as the Bank of England lowered its benchmark rate by 1.5 percentage points to 3 percent yesterday, the biggest cut since 1992, as the seizure in credit markets left Britain on the edge of its first recession since 1991. Signs the economy is faltering prompted a 50 billion-pound ($78.4 billion) bank-rescue package from the government.