Sept. 11 (Bloomberg) -- The dollar may weaken this week as banks and companies seek to refinance about $700 billion of commercial paper in the U.S. currency this week, according to analysts at Citigroup Inc.

Borrowers in the commercial paper market are struggling to sell new notes because of concern some of the short-term debt is linked to U.S. subprime mortgage assets. The shortage of investors in the market has spurred expectations the Federal Reserve will cut interest rates, sending the dollar lower, the analysts said in a report.

``The situation is really exacerbating the strains on the dollar,'' Michael Hart, one of the authors of the report, said in a telephone interview from London. ``After an initial phase where people were viewing Treasuries and the dollar as a safe haven, we're entering a second phase where concerns over the U.S. financial system are causing a weaker dollar.''

Hart wrote the report, titled ``Can You Spare $700 Billion This Week?'' with Tom Fitzpatrick and Todd Elmer in New York.

About $600 billion of commercial paper comes due in the U.S. this week, taking account of $265 billion the Federal Reserve in Washington says is maturing and last week's sales of paper due in nine days or less. In Europe, a another $94 billion needs financing, according to the report.

The dollar dropped against the euro today, falling to 1.3824 per euro and extending four days of losses. It has slipped 3.5 percent against the single currency in the past three months. The dollar has slid 7.3 percent against the Japanese yen, data compiled by Bloomberg show.

`Triple Whammy'

The U.S. economy faces a ``triple whammy,'' Hart said. The business cycle is beginning to turn down, with economic data such as the non-farm payrolls report last week showing there are going to be layoffs. There is the ``persistent'' current account deficit and on top of that there is now the financial crisis, he said.

The U.S. commercial paper market is larger than that in Europe, at about $1.9 trillion, compared with about $730 billion of European commercial paper, according to the report. About half the U.S. market is asset backed compared with about 33 percent in Europe.

The $94 billion maturing in Europe, while ``relatively small'' is significant because it's about what the European Central Bank put into financial markets on Aug. 9, the analysts wrote in the report today.

Asset-backed commercial paper is secured on car loans, mortgages and trade receivables. Defaults on subprime home loans by borrowers in the U.S. have prompted investors to shun the notes because the collateral securing them may be worthless.

To contact the reporter on this story: John Glover in London at johnglover@bloomberg.net

Last Updated: September 11, 2007 09:18 EDT