Sept. 4 (Bloomberg) -- The euro fell against the dollar on speculation the European Central Bank will signal the risk of a recession in the region has increased, boosting the prospect of interest-rate cuts.

Europe's common currency stayed lower after policy makers left the main refinancing rate at a seven-year high of 4.25 percent today, as forecast by all but one of 53 economists surveyed by Bloomberg News. The bank will lower its key rate twice in the first half next year to 3.75 percent, a separate survey indicated. ECB President Jean-Claude Trichet will brief reporters on today's decision at 2:30 p.m. in Frankfurt.

``We expect to see ECB easing beginning in the first quarter of 2009 as the economy continues to turn down,'' analysts led by Mansoor Mohi-uddin, Zurich-based chief currency strategist at UBS AG, the world's second-largest currency trader, wrote in a research note. ``We remain of the view that the euro will weaken further, mainly versus the greenback.''

The euro dropped to $1.4470 as of 12:46 p.m. in London, from $1.4498 yesterday in New York. The single currency has fallen about 9 percent against the dollar since reaching a record high $1.6038 on July 15. It was at 156.80 yen, from 157.01.

The ECB raised rates in July by a quarter point after inflation accelerated to twice its 2 percent limit. Reports in the past month showed the euro-region economy contracted in the second quarter and inflation slowed to 3.8 percent in August. Trichet said on Aug. 7 economic growth will be ``particularly weak'' through the third quarter.

Dollar Index

The ICE future exchange's Dollar Index, which gauges the greenback against the currencies of six major U.S. trading partners, rose 0.1 percent to 78.153. It touched 78.310 this week, the highest level since October, on speculation a decline in oil prices will support economic growth in the world's largest energy consumer.

Gains in the dollar may be limited by speculation a deteriorating labor market will restrain consumer spending.

U.S. nonfarm payrolls fell by 75,000 jobs in August, more than the previous month's decline of 51,000, according to a Bloomberg survey before the Labor Department report due tomorrow.

Business across most of the U.S. was ``slow'' last month, the Federal Reserve said yesterday in its regional economic survey, known as the Beige Book.

Technical Indicators

The South Korean won climbed the most of any currency in the world, rising to 1,129.02 per dollar from 1,148.60 yesterday, when it touched a four-year low of 1,159.05. South Korea doesn't face a crisis similar to the 1997 meltdown, Finance Minister Kang Man Soo said yesterday on KBS TV in Seoul. The won is Asia's worst- performing currency this year.

Technical analysis shows the euro may fall to $1.4360 in the next few days, said Masashi Hashimoto, a currency analyst in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's largest publicly listed bank.

The common European currency is poised to decline as its average price over the past 200 days is starting to fall, he said. First support at $1.4360 is a 38.2 percent retracement of the euro's rise from its low of $1.1640 on Nov. 15, 2005, to its record high of $1.6038 reached on July 15, according to a series of numbers known as the Fibonacci sequence.

To contact the reporter on this story: Agnes Lovasz in London at alovasz@bloomberg.net

Last Updated: September 4, 2008 07:50 EDT