(Corrects ADP January reading in 17th paragraph.)

March 4 (Bloomberg) -- The dollar fell for a sixth day against the yen and traded near a record low versus the euro as traders increased bets that the Federal Reserve will lower interest rates by 0.75 percentage point this month.

The dollar index, which compares the currency to those of six trading partners, declined as futures showed a 76 percent likelihood the Fed will reduce rates to 2.25 percent. Last week, traders saw no chance of a cut that steep. The Australian dollar dropped as central bank as central bank Governor Glenn Stevens signaled interest rates may have peaked after today's increase.

``Don't fight the dollar weakness,'' a team of strategists at Zurich-based UBS AG, led by Mansoor Mohi-uddin, wrote in a research report published today. This week's U.S. data ``will likely increasingly suggest a recession,'' they wrote.

The dollar traded at 103 yen at 6:53 a.m. in New York, from 103.49 yen yesterday, when it fell to 102.62 yen, the lowest since Jan. 28, 2005. The U.S. currency was at $1.5210 per euro, from $1.5204 yesterday, when it slipped to $1.5275, the weakest level since the European currency's 1999 debut. UBS, the world's second-largest currency trader, recommended buying the euro against the dollar.

The U.S. Dollar Index traded on ICE Futures in New York was at 73.58 after declining to a record low of 73.354 yesterday. The slump in the U.S. currency helped push the price of oil to a record of $103.95 yesterday and gold to an all-time high of $989.54 an ounce.

The yen rose for a second day against the euro, gaining 0.4 percent to 156.68.

`Grossly Misaligned'

UBS Wealth Management Research, a unit of UBS, wrote in a separate report that the world's foreign exchange markets are ``grossly misaligned'' and Asian currencies may ``appreciate sharply.''

The Singapore dollar rose to S$1.3897 against the U.S. currency, a decade high, before trading at S$1.3904, from S$1.3910 yesterday. The Taiwan dollar advanced 0.6 percent to NT$30.922 per dollar.

The Australian dollar, also known as the Aussie, fell as Stevens said there is evidence consumer spending is moderating. The central bank raised the key rate to 7.25 percent, the highest in 12 years. The Aussie was at 93.13 U.S. cents, from 93.96 cents yesterday and 94.98 on Feb. 28, the highest since March 1984.

``The Australian dollar is likely to be sold hard in the near-term,'' Hans-Guenter Redeker, head of currency strategy in London at BNP Paribas SA, one of the world's 10 biggest currency traders, wrote in a note to clients. A support level at 92.75 cents per dollar ``looks set to be broken,'' he said.

Canadian Rates

The Canadian dollar advanced 0.4 percent to 98.65 cents per U.S. dollar, from 99 cents yesterday, amid speculation the Bank of Canada will cut interest rates today to help offset a slump in exports to the U.S.

Economists surveyed by Bloomberg are divided on whether central bank Governor Mark Carney will cut Canada's benchmark rate by a quarter point or a half point from the current 4 percent at 9 a.m. in Ottawa. Seventeen say it will fall to 3.75 percent, and 19 predict the biggest reduction since 2001 to 3.5 percent.

Japan's currency also climbed 1.3 percent to 95.97 against the Aussie and 1 percent to 82.68 per New Zealand dollar as widening credit-market losses prompted investors to reduce so- called carry trades

Yen Forecast

Japan's benchmark rate of 0.5 percent, the lowest among industrialized nations, compares with 8.25 percent in New Zealand and 4 percent in Europe. In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher rates, earning the spread between the two. The risk is that currency moves erase those profits.

The dollar may fall below 100 yen in one or two months as Japanese investors lose confidence in dollar-denominated assets, Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp. in Tokyo, the second largest U.S. bank, wrote in a research note.

Futures on the Chicago Board of Trade show investors have raised wagers on deeper Fed interest-rate reductions since Fed Chairman Ben S. Bernanke suggested last week the central bank was ready to lower borrowing costs further to bolster the economy.

Companies in the U.S. probably added 18,000 workers in February, the least since June 2003 and down from a revised 126,000 workers in January, data from ADP Employer Services may show tomorrow, according to a Bloomberg News survey.

`Anxious to Sell'

``A lot of traders are anxious to sell the dollar,'' said Hiroshi Yoshida, foreign-exchange trader in Tokyo at Shinkin Central Bank, Japan's fifth-largest publicly traded lender by assets. ``The U.S. economy looks weak.''

The U.S. currency may fall to 102 yen this week, he said. The euro gained 15 percent against the dollar in the past year, eroding the competitiveness of European exports. The synthetic euro, which estimates the European currency's value before its inception in 1999, yesterday rose to the strongest level since at least January 1989, when Bloomberg's data on the measure began.

U.S. and European officials said yesterday they would prefer the dollar decline to end. A strong dollar is in the interests of the U.S., European Central Bank President Jean- Claude Trichet told reporters in Brussels. U.S. Treasury Secretary Henry Paulson echoed those remarks in an interview with Bloomberg Television.

ECB Rates

``The concern from European officials is intensifying, but I don't think we're at the point of intervention,'' said Mitul Kotecha, head of foreign-exchange research in London at Calyon, the securities unit of Credit Agricole SA, France's second- biggest bank. ``We're going to need to see a lot more jawboning before we get any intervention.''

While the Fed has cut borrowing costs five times to 3 percent since September, the ECB has kept its key rate at a more than six-year high of 4 percent to curb inflation even as economic growth slows.

European producer-price inflation accelerated to the highest in 17 years in January, the European Union's statistics office said today. Consumer-price inflation remained at 3.2 percent in February, the highest level since 1999, keeping pressure on the region's central bank to leave borrowing costs unchanged.

ECB policy maker Athanasios Orphanides said the bank is worried about rising oil prices, which have helped drive inflation.

The yield advantage of two-year German bunds over comparable-maturity Treasuries was 1.57 percentage points, within 1 basis point of the widest level since 1993, making European debt more attractive.

To contact the reporters on this story: Gavin Finch in London at gfinch@bloomberg.net; Kosuke Goto in Tokyo at kgoto2@bloomberg.net

Last Updated: March 4, 2008 08:17 EST