Dollar falls against Euro, Pound, Yen

The dollar slid against most major currencies Monday with markets awaiting a decision by the U.S. Federal Reserve about a possible third interest rate cut this year. The 13-nation euro bought $1.4712 in late New York trading, up from $1.4655 late Friday. The British pound was a little higher, climbing to $2.0462 from $2.0315. The dollar fell to 111.67 Japanese yen from 111.69 yen Friday.

The Fed meets Tuesday to discuss interest rates, with analysts expecting the U.S. central bank to trim its key rate, now at 4.5 percent, by a quarter of a percentage point. Some have speculated about the possibility of a half-point cut. The expected cut would be the third amid mortgage problems in the U.S. that have tripped up borrowers and caused a credit crisis among banks -- fueling wider fears about the health of the U.S. economy.

Lower interest rates can jump-start an economy, but they can also weaken a currency as investors transfer funds to countries where they can earn higher returns. If the U.S. does cut rates, it will follow in the footsteps of the Bank of England, which last week cut its benchmark rate to 5.5 percent from 5.75 percent.

Canada's central bank also cut its rate to 4.25 percent. The European Central Bank kept its rate unchanged at 4 percent last week but appeared to set the stage for a possible rate decrease sometime in early 2008. The dollar fell to 1.1282 Swiss francs late Monday from 1.1292 francs. The U.S. currency rose to 1.0073 Canadian dollars, up from 1.0045 Friday.

US dollar mixed ahead of Federal Reserve's rate decision

The US dollar was mixed against major currencies halfway through the morning session in Sydney Tuesday after falling against the euro and sterling in New York overnight as investors positioned themselves for a US interest rate cut. The Federal Open Market Committee is widely expected to lower rates at its meeting Tuesday to help reduce funding costs and jumpstart economic growth.

The only question is by how much. ''Another rate cut is virtually a done deal, but the size of the cut and the language of the statement are still uncertain,'' said currency strategists at Commonwealth Research. ''We continue to maintain that a 25 basis point rate cut to 4.25 percent will occur. Markets have also moved to price out the risk of a larger 50 basis point cut following the stronger-than-expected US payrolls data on Friday, but we view the implied 36 percent chance still being priced as too high.''

National Australia Bank head of currency strategy John Kyriakopoulos said the Fed's accompanying statement will be scrutinised for clues on the direction of monetary policy. ''Traders will also focus on what the Fed says about the credit crunch and its preparedness to cut interest rates further in the accompanying statement,'' Kyriakopoulos said. At 10.20 am (2320 GMT), one euro was buying 1.4716 dollars, unchanged from late New York trade.

The 13-nation currency was given a boost overnight after European Central Bank policy makers said they were concerned about inflation, making an interest rate rise more likely than a rate cut. The sterling was doing 2.0457 dollars, down from 2.0482 dollars overnight. The sterling was pushed higher in New York trade by UK government figures that showed house prices accelerated in October, going against the trend of other surveys that have shown prices falling in recent months.

The dollar was trading at 111.77 yen, up from 111.66 yen at the close of the US session, as demand for yen-funded carry trades tracked US markets higher. Wall Street strengthened after UBS announced a 10 billion dollar writedown on the value of investments backed by mortgages, which was considered a ''cleansing act'', said John Noonan, an analyst at Thomson IFR.

The Swiss investment bank also announced an 11.5 billion dollar cash injection from the government of Singapore and an unidentified Middle Eastern investor. Elsewhere, the Australian dollar was up at 88.62 US cents from 88.46 cents on improved carry-trade demand.

''The near 10 percentage point improvement in our risk-appetite index over the past week has helped Australian dollar lift from just above 86.60 cents to just under 88.50 cents,'' said Kyriakopoulos. ''However, we suspect that 89.50 will provide stiff resistance unless expectations for a RBA (Reserve Bank of Australia) rate hike in February are resurrected.''

Sydney at 10.20 am (2320 GMT) US dollar 111.77 yen 1.128 sfr Euro 1.4716 usd 164.47 yen 1.6598 sfr 0.7194 stg Sterling 2.0457 usd 228.639 yen 2.30711 sfr Australian dollar 0.8862 usd 0.4333 stg 99.055 yen New Zealand dollar 0.7824 usd.