Nov. 21 (Bloomberg) -- The dollar may extend its biggest loss in almost two years against the euro on speculation the Federal Reserve needs to keep cutting borrowing costs to prevent the world's largest economy from slipping into recession.

Reports today are forecast to show an index regarding the U.S. economic outlook fell in October while consumer confidence sank to a two-year low this month. The dollar weakened to a record low against the euro and Swiss franc after the Fed cut its 2008 growth forecast yesterday.

``The trend of a weakening dollar will continue,'' said Adam Boyton, a senior currency strategist in New York at Deutsche Bank AG, the world's largest currency trading bank. ``If the Fed doesn't cut rates next month, the risk of a recession will rise considerably.''

The dollar traded at $1.4841 per euro and 109.97 yen at 7 a.m. in Tokyo. The U.S. currency touched $1.4852 yesterday, the cheapest level since the 13-nation currency started trading in January 1999. The U.S. currency fell 1.2 percent yesterday, the biggest decline since Jan. 23, 2006. The dollar also reached an all-time low of 1.1055 against the Swiss franc. The euro bought 163.16 yen.

The dollar will decline to $1.50 per euro by the end of the year, according to Boyton. Europe's single currency will trade at $1.45 by year-end, according to the median forecast of 43 analysts and brokerages surveyed by Bloomberg News.

Fed Cuts Forecast

The Fed cut its 2008 growth forecast to between 1.8 percent and 2.5 percent, from 2.5 percent to 2.75 percent. Policy makers said in the minutes of their Oct. 31 meeting yesterday that they are concerned about credit-market losses, even as they described the interest-rate cut as a ``close call.''

The central bank reduced the target rate for overnight loans between banks to 4.5 percent last month, after a 50-basis- point reduction in September. The odds of the Fed cutting rates a quarter-percentage point to 4.25 percent on Dec. 11 are 84 percent, up from 72 percent a month ago.

The New York-based Conference Board's index of leading U.S. economic indicators probably fell 0.3 percent in October, after a 0.3 percent gain a month earlier, according to a Bloomberg News survey.

The Reuters/University of Michigan's final consumer sentiment index for November probably fell to 75, from 80.9 at the end of October, a separate survey showed. Both reports are scheduled for release at 10 a.m. New York time.

``There are lots of forces working against the dollar,'' said Robert Fullem, vice president of U.S. corporate currency sales at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``The market sentiment toward the dollar is very negative. You are going to see further declines in the dollar.''

Dollar Drops

Currencies in New Zealand, the U.K., South Africa and Norway gained yesterday as the prospect of lower rates in the U.S. enticed investors away from dollar-denominated assets. The dollar also fell on speculation a group of six Arab nations will end their fixed exchange rates to the U.S. currency.

The U.S. dollar has declined against all 16 most-actively traded currencies except Mexico's peso this year as the Fed cut interest rates twice to help revive economic growth amid the worst housing market slump in 16 years, and as companies reported losses on securities tied to U.S. subprime mortgages.

The dollar has lost 11 percent against the euro, 7.6 percent versus the yen and 9.2 percent against the franc over the same period.

``The trend of dollar weakness has momentum,'' said Tom Fitzpatrick, global head of currency strategy at Citigroup Global Markets Inc. in New York. ``I won't be surprised if euro dollar trades'' at $1.50 per euro by mid-December.

Over the past five years, the dollar has tumbled 50 percent against Brazil's real, 38 percent against the Canadian dollar and 32 percent against the euro, prompting European Central Bank President Jean-Claude Trichet to say this week that ``disorderly'' currency moves are ``undesirable.''

To contact the reporter on this story: Min Zeng in New York at mzeng2@bloomberg.net.

Last Updated: November 20, 2007 17:04 EST