March 24 (Bloomberg) -- The dollar rose against the yen and the euro on speculation the Federal Reserve's interest-rate cuts and efforts to spur lending will help revive economic growth.

The U.S. currency also advanced versus the Swiss franc and Canadian dollar, extending gains since the Fed's March 18 move to cut its benchmark rate 0.75 percentage point to 2.25 percent and decision last week to allow more financial firms to borrow federal money. The dollar also rose after some analysts said the Group of Seven nations may take coordinated action in currency markets to counter the impact of a slowing U.S. economy.

``The dollar will remain firm in the near term,'' said Kosuke Hanao, head of currency sales in Tokyo at HSBC Bank, a unit of Europe's biggest lender. ``The markets valued the Fed's relief measures last week as good ones.''

The dollar climbed to $1.5341 per euro, the highest since March 12, before trading at $1.5390 as of 5:35 p.m. in Tokyo, from $1.5431 in New York on March 21, when it posted its first weekly advance against the euro in more than a month. It also advanced to 100.04 yen from 99.58. Japan's currency traded at 153.96 per euro from 153.55.

Currency moves may be exaggerated because trading volumes are less than normal due to the Easter holiday, said Kenichiro Fujita, manager of derivatives marketing in Tokyo at Aozora Bank Ltd., Japan's ninth-largest publicly traded lender by assets. Markets are closed today in the U.K., Australia and New Zealand.

Dollar Index

The U.S. Dollar Index traded on ICE Futures in New York, which tracks the value of the currency against six major counterparts including the euro and yen, rose 0.5 percent to 73.058. The dollar climbed 0.8 percent versus the Swiss franc to 1.0171, 0.4 percent against the Norwegian krone to 5.2813 and 0.6 percent against Canada's dollar to 1.0292.

The Fed on March 20 expanded collateral eligible for its auction of Treasuries to include bundled mortgage debt and securities linked to commercial-property loans. The Fed announced on March 11 a program to swap $200 billion in Treasuries for debt including mortgage-backed securities.

The dollar also advanced as people who trade currencies say confidence in the markets to determine exchange rates is falling.

``The risks of coordinated intervention are going to increase in the second quarter for sure as the dollar weakens further,'' said Mitul Kotecha, head of foreign-exchange research in London at Calyon, the securities unit of Credit Agricole SA, France's second-biggest bank.

`Can Manage'

Japan's currency may snap three days of losses against the dollar after Fujio Mitarai, chairman of the nation's Keidanren business lobby and head of Canon Inc. said the government doesn't need to sell yen to curb its 3.8 percent gain this month.

``The current situation doesn't call for intervention,'' Mitarai said at a press conference in Tokyo. ``The majority of companies can manage the yen trading between 100 and 110'' against the dollar, he said.

One-month volatility implied by dollar-yen options climbed to 24 percent on March 17, the highest since January 1999, from a 2008 low of 10.275 percent on Feb. 26. It was at 16.22 percent today. Traders quote implied volatility, a gauge of expected swings in exchange rates, as part of pricing options.

The dollar may fall to 95.77 yen in two to three weeks, said Kengo Suzuki, a currency strategist at Shinko Securities Co. in Tokyo, citing technical analysis.

The U.S. currency has formed a pennant that signals it is likely to extend its 10.5 percent decline this year, Suzuki said. A pennant is formed when rising and descending trend lines intersect to form a triangle.

Fed Statement

The Federal Open Market Committee on March 18 said inflation expectations may have risen, even as they cut the benchmark interest rate three-quarters of a percentage point and began lending directly to big Wall Street dealers.

``The FOMC statement last week mentioned increased uncertainty over the inflation outlook, and in doing so, signaled growing reluctance to continue cutting rates,'' Ashley Davies, a strategist in Singapore at UBS AG, the second-largest currency trader, wrote in a research note today. ``This may be helping the U.S. dollar to stabilize.''

There are ``tentative'' signs of a bottoming out in the dollar, said analysts led by head of global currency research James McCormick at Lehman Brothers Holdings Inc., citing the Fed's new lending facility and a narrowing in the U.S.'s current-account deficit.

``The building blocks for a dollar bottom look to be nearly in place,'' wrote London-based McCormick and Stephen Hull in a research report dated March 20. ``We are net long of dollars for the first time in 2008.''

The Commerce Department said on March 17 the U.S. current- account deficit narrowed to $172.9 billion in the fourth quarter, the smallest in three years, from a revised $177.4 billion gap in the third quarter.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Kosuke Goto in Tokyo at kgoto2@bloomberg.net.

Last Updated: March 24, 2008 04:52 EDT