Dec. 2 (Bloomberg) -- The dollar fell to a record against the euro and declined versus the yen in Asia on speculation Japan and Europe won't unite to stem the U.S. currency's drop.

Minister of Finance Sadakazu Tanigaki said in an interview that while Japan, the U.S. and Europe are in close touch regarding currencies, ``it's not supposed to be understood that we are preparing for joint intervention.'' Japan hasn't sold yen since March. The European Central Bank last entered the market in 2000.

``Any initial intervention is going to be from Japan alone, not coordinated with the ECB,'' said Harvinder Kalirai, a market analyst in Sydney at State Street Corp., the world's largest custodian of assets with more than $1.2 trillion under management. ``It's going to take a higher euro before the ECB joins Japan. The dollar is still going down.''

The dollar weakened to a record $1.3375 per euro, and was trading at $1.3360 at 1:55 p.m. in Tokyo from $1.3345 late in New York yesterday, according to electronic currency-dealing system EBS. The dollar also dropped as low as 102.15 yen before trading at 102.24, from 102.58. It fell to 102.01 yen on Nov. 26, the weakest in almost five years.

``We keep in close contact with the authorities'' of Europe and the U.S., Tanigaki said in Tokyo, adding that Japanese, U.S. and European monetary authorities share the same view of the currency market.

``They can discuss whatever they want, it doesn't mean it's going to happen,'' Kalirai said, adding that the ECB may not sell euros until after it rises above $1.40.

Tacit Approval

San Francisco Federal Reserve Bank President Janet Yellen yesterday said the U.S. trade gap is holding back economic growth. Treasury Secretary John Snow, who sets dollar policy, said in London on Nov. 17 that the U.S. supports a ``strong dollar,'' while suggesting the Bush administration will not do anything to support the currency's value. The Fed is in charge of interest-rate policy.

``U.S. Treasury officials have really said nothing other than a repeat of the strong-dollar mantra,'' said Allison Montgomery, a currency strategist at Westpac Banking Corp. in Sydney. ``The market is still taking it as a tacit approval for a further decline in the dollar.''

The dollar will rebound, halting its 3.7 percent drop in the past month versus the yen, as the strength of the U.S. economy increases the appeal of its assets, said Zembei Mizoguchi, a former top Japanese currency policy maker.

Mizoguchi and Watanabe

``The dollar is not in a position to continue its declines, given the strength of the U.S. economy,'' said Mizoguchi, who now heads the Japan Center for International Finance. ``The situation doesn't look amenable for people to bet on a further rally for the yen.'' He didn't specify when the dollar's reversal, which ``could be swift,'' will happen.

Hiroshi Watanabe, Japan's top currency policy maker, said yesterday that Japan sees no hurdle in selling yen regardless of how Europe and the U.S. react, and that market moves had been ``a little volatile.''

His remarks came a day after government reports showed factory output dropped the most in eight months and household spending declined for a third month in four. Signs of a slowing economy may fuel speculation Japan will sell yen to stem its currency's three-month, 6.8 percent rally against the dollar.

`Last Warning'

``Watanabe's comments were basically the last warning,'' said Callum Henderson, a currency strategist in Singapore at Standard Chartered Bank Ltd. At the same time, ``words will cause the market to pause, but not stop the dollar from falling. A break of 102 will most likely trigger'' yen selling.

The Bank of Japan, which sold a record 32.9 trillion yen ($321 billion) in the fiscal year ended March 31 to stem its increase, hasn't sold this fiscal year, according to Ministry of Finance data. The ministry directs the BOJ to buy or sell yen.

``Japan won't welcome the yen's strength,'' said Tetsu Aikawa, a currency salesman for institutional customers at UFJ Bank Ltd. ``Europe already doesn't look keen on taking action, making any joint action even more difficult. The dollar will drop more against the euro than the yen.''

The U.S. currency may fall to $1.35 per euro this year, while the yen's gain may be limited to 102, he said.

Long-Term Bottom

The dollar may decline to $1.57 per euro and a record 87 yen before it finds a ``long-term bottom,'' according to a study by Goldman Sachs Group Inc.

``It seems very hard to believe that the dollar is close to the end of its decline,'' given the history of currency crises in other countries, wrote Alberto Ades, director of global markets research, and Jens Nordvig, a Goldman market economist.

Goldman studied 26 emerging-market currency crises between 1985 and 1999 to estimate how low the dollar may drop to help narrow its record current-account deficit.

Yellen helped send the dollar down almost 1 percent on Sept. 10, when she said the deficit will widen unless the dollar falls.

Overseas investors may curb their financing of the U.S. deficit, Fed Chairman Alan Greenspan said at the European Banking Congress in Frankfurt on Nov. 19. ``A diminished appetite for adding to dollar balances must occur at some point,'' he said.

The pound was trading near the highest versus the dollar in more than 12 years, in part on signs U.K. economic growth will accelerate.

The U.K. currency was at $1.9340, from $1.9344, after rising to $1.9357 in New York trade, the strongest since September 1992.

In other trading, the dollar was at 1.1383 Swiss francs, from 1.1402 francs. The yen rose to 136.48 per euro, from 136.90.

To contact the reporter on this story: Taizo Hirose in Tokyo at hirose2@bloomberg.net.

Last Updated: December 2, 2004 00:16 EST