Nov. 2 (Bloomberg) -- The dollar fell, headed for a fourth weekly loss against the euro, on speculation a U.S. government report will show slower employment growth and increase pressure on the Federal Reserve to cut interest rates.

The currency was also poised for the biggest loss in 10 weeks against the British pound as stocks in Asia and Europe tumbled for a second day. The dollar weakened against 13 of the 16 most actively traded currencies tracked by Bloomberg today.

There's growing ``speculation the Fed will cut rates much more aggressively than has been priced in, which is very negative for the dollar,'' said Michael Klawitter, a currency analyst at Dresdner Kleinwort in Frankfurt who forecasts the U.S. currency may fall to as low as $1.50 by the end of March. ``There is mounting concern the market has underestimated the risks to the U.S. financial sector and the wider economy.''

The dollar dropped to $1.4478 per euro by 7:43 a.m. in New York, from $1.4425 yesterday and $1.4393 a week ago. It reached $1.4504 on Oct. 31, the lowest since the European currency's debut in January 1999.

The euro extended its gains after France's European Affairs Minister Jean-Pierre Jouyet told Les Echos that a strong currency ``allows for the reducing of inflationary tendencies, limiting the consequences of rising oil prices.'' Oil headed for a fourth week of gains today, trading above $94 a barrel in New York.

Pound Gains

The U.S. currency fell 1.5 percent this week to $2.0853 versus the pound, the biggest decline since Aug. 24. It rose 0.3 percent to 114.72 yen. The dollar may drop to 113 yen and $1.45 against the euro today, according to Akio Shimizu, chief manager of foreign-exchange trading at Mitsubishi UFJ Trust & Banking Corp. in Tokyo.

Declines in the dollar are being driven by signs of slowing U.S. economic growth. U.S. employers added 84,000 workers to nonfarm payrolls last month following an increase of 110,000 in September, based on the median forecast in a Bloomberg News survey. The government will release the report at 8:30 a.m. in Washington.

``We're in a bearish dollar environment,'' said Sue Trinh, senior currency strategist in Sydney at RBC Capital Markets, the second-most accurate forecaster of exchange rates in the second quarter in Bloomberg surveys.

The Fed cut its target rate for overnight loans between banks on Oct. 31 by a quarter-percentage point to 4.5 percent, its second reduction in as many months, and said ``the upside risks to inflation roughly balance the downside risks to growth.''

`Soft Data'

The Fed's statement ``doesn't rule out further rate cuts and we've seen soft data out of the U.S,'' said Trinh, who forecasts the dollar to fall to $1.46 by year-end.

The yen has gained against all 16 most active currencies in the past two days as global stocks have fallen and the cost of insuring against company-debt defaults has risen, discouraging so-called carry trades. The Australian dollar, the New Zealand dollar and the South African rand have declined the most versus the yen over the past two days.

The spread, or difference in yield, between benchmark two- year U.S. and Japanese bonds, among securities most sensitive to monetary policy changes, narrowed to 2.93 percentage points yesterday, the least since December 2004. The extra yield on German two-year notes over their U.S. equivalents has widened to 2.26 percentage points, the most since April 2004.

Yen's Weekly Drop

The yen still headed for a weekly decline against eight of the 16 most-active currencies including the pound and the Brazilian real, favorites for carry trades because of their higher yields. Japan's currency fell 2 percent to 239.16 per pound from a week earlier, and dropped 1.5 percent to 65.5252 versus the real from last week. The benchmark rate in the U.K. is 5.75 percent and in Brazil it's 11.25 percent.

The yen fell the most against the Australian dollar today as Bank of Japan Governor Toshihiko Fukui reiterated that the central bank will raise rates gradually based on developments in the economy and prices. The BOJ this week kept rates on hold at 0.5 percent and forecast slower economic growth and abandoned a prediction that consumer prices will increase this year.

``There's no catalyst for yen-buying,'' said Ryohei Muramatsu, manager of Group Treasury Asia at Commerzbank in Tokyo. ``The Japanese economy is sluggish, and there is a big question mark whether the BOJ can raise rates by the end of March.'' Japan's currency may fall to 115.10 a dollar and 165.90 a euro today, he forecast.

One-month implied volatility for the yen rose to 9.49 percent today, from 9.05 percent yesterday. Dealers quote implied volatility, a gauge of expectations for currency moves, as part of pricing options. Higher volatility may discourage carry trades.

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

Last Updated: November 2, 2007 07:43 EDT