NEW YORK (Bloomberg) — The dollar fell to a record against the euro and dropped to the weakest since 1981 versus the pound on concern deepening credit-market losses will prompt the Federal Reserve to reduce interest rates a third time this year.

Investors sold the dollar for a fourth week versus the euro as German bunds widened their yield advantage over Treasuries to the highest since 2004 after the Fed's rate cut on October 31. The European Central Bank and Bank of England are forecast to keep borrowing costs unchanged November 8, which may entice investors away from US assets.

"The dollar's negative tone remains," said Robert Fullem, vice president of US corporate currency sales at Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. "I don't think there are many dollar buyers there. The interest-rate differential continues to move against the dollar."

The dollar fell 0.8 percent this week to $1.4504 per euro, reaching $1.4528 yesterday, the weakest since the European currency's debut in January 1999. The loss this week extended the dollar's decline this year to 9 percent. The dollar lost 1.8 percent against the pound for the week and touched $2.0897 yesterday, the lowest since May 1981.

The dollar may decline to $1.50 per euro and $2.10 against the pound by year-end, Fullem said.

The yen declined against 15 of 16 most-actively traded currencies this week after the Bank of Japan kept its interest rate at 0.5 percent and cut its growth outlook. Japan's lowest borrowing costs among major economies encouraged investors to sell the yen and buy higher-yielding assets elsewhere.

Australia's benchmark interest rate is 6.5 percent, compared with 8.25 percent in New Zealand.

The yen lost 0.6 percent this week to 114.85 per dollar and 1.4 percent to 166.63 versus the euro. Japan's currency declined 1.1 percent over the same period versus the Australian dollar and 0.5 percent against New Zealand's dollar.

Canada's dollar was the best performer among major currencies last week, rising to the strongest against its US counterpart since it was floated by the Bank of Canada in 1950. A report showing the nation's job growth accelerated and surging commodities prices boosted the allure of local assets.

The Canadian dollar gained 2.9 percent this week against the US currency and reached $1.0721 yesterday. Crude oil climbed to a record $96.24 a barrel on November 1 while gold yesterday settled above $800 an ounce for the first time since 1980.

The European Central Bank will keep its interest rate at four percent on November 8, while the Bank of England may hold borrowing costs at 5.75 percent, according to Bloomberg forecasts.

The yield advantage of the two-year German bund over comparable-maturity US Treasuries increased to 0.26 percentage point yesterday, the widest since April 2004. A widening spread boosts the allure of European debt relative to that in the US

The dollar has weakened against all 16 major currencies this year as Fed rate cuts dimmed the allure of US assets. The US Dollar Index traded on ICE Futures US in New York fell to as low as 76.220 on Friday, the weakest since its inception in 1973.