February 24, 2008	Sunday	Safar 16, 1429

NEW YORK, Feb 23: The dollar weakened on Friday, dragged down by expectations that the US Federal Reserve will have to cut interest rates sharply again in March to ward off recession in the world’s biggest economy.

The euro was at $1.4826 up from $1.4811 late Thursday in New York.

The dollar slipped to 107.14 yen from 107.37.

A stronger-than-expected survey on European business, suggesting the eurozone is proving resilient to both a US slowdown and a global credit crunch, dimmed the near-term prospects of a European Central Bank rate cut, dealers said.

The dollar remains on the defensive ... Reinforcing the dollar decline was a stronger-than-expected report on eurozone services, which reduced the likelihood of a (eurozone) rate cut, said Ashraf Laidi at CMC Markets.

Dealers said the deteriorating outlook for the US economy has increased the odds the Fed will cut interest rates sharply again at its March 18 meeting, most likely by half a percentage point after a reduction of 1.25 percentage points in January.

Market sentiment is that there is a very good chance of another rate cut coming up, said Mic Mills at TradIndex.com.

Market players put the likelihood of a half-point Fed rate cut at 80 percent, piling the pressure on the dollar as other currencies offer better returns.

The NTC Research index based on a survey of business leaders in the 15-nation eurozone rose to 52.7 points in February from 51.8 points in January, halting a steady decline and beating forecasts for a fall to 51.4 points. A reading below 50 points indicates contraction.

The improvement was driven by an upturn in the vast service sector, where the index rose to 52.3 points in February after stalling at 50.6 points in January.

The unexpected rise ... was something of a relief and suggests that while activity in the (eurozone) region has slowed further this year, it is not grinding to a halt, noted Capital Economics analyst Ben May.

Unlike for the US, recession talk is misplaced when it comes to the eurozone, noted CIBC economist Audrey Childe-Freeman.

With the euro anchored above the psychological $1.48-level, a run to the 1.4968 and beyond seems even more likely, said Kathy Lien at Forex Capital Markets.—AFP