The dollar fell further from recent six-week highs against the euro and the yen today as speculation faded the US Federal Reserve might cut rates at its policy meeting tomorrow.
Firmer equity markets and talk of an imminent rate cut by the Fed have bolstered the dollar in recent weeks, allowing it to stage an impressive rebound from July's multi-year lows.
But the dollar, which began its descent on Friday, lost almost two thirds of a per cent in early European trading today, touching $0.9758 per euro and 119.16 yen.
"It is difficult to see an upside for the dollar out of Tuesday," said Mr Julian Jessop, chief European economist at Standard Chartered.
"If the Fed doesn't cut rates equity markets will be disappointed and it's negative for the dollar. If they do cut it will boost interest rate differentials and support other currencies".
News that US Airways, the sixth-largest US airline, had sought Chapter 11 bankruptcy protection yesterday also offered an excuse for investors to sell dollars. US Airways is the first large US airline to make a Chapter 11 filing since the September 11th attacks.