The dollar fell to a record low against the euro after European inflation accelerated in March, reducing the chances that the region's central bank will follow the Federal Reserve in cutting interest rates.

The U.S. currency had its biggest decline versus the euro in three weeks, trading as low as $1.5967, and dropped against the yen before a report that may show U.S. housing starts slid to near a 17-year low. European Central Bank Executive Board member Juergen Stark said yesterday interest rates at 4 percent may not be high enough to contain inflation. Traders are betting with certainty the Fed will cut its benchmark 2.25 percent rate by at least a quarter point on April 30.

``There's a big desire to sell the dollar and the inflation report provided a trigger for new orders,'' said Neil Jones, head of European hedge-fund sales in London at Mizuho Capital Markets, a unit of Japan's third-largest lender by market value. ``The interest rate-differential is going to remain in favor of Europe.'' The dollar may fall to $1.60 per euro today, he said.

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The U.S. currency fell to $1.5946 against the euro as of 6:27 a.m. in New York, from $1.5790 in New York yesterday. The dollar was also at 100.94 yen from 101.83. The yen was 160.99 per euro, from 160.78.

The dollar has dropped more than 13 percent on a trade- weighted basis in the past year as the Fed lowered borrowing costs to shore up the economy amid the fallout from the collapse of the subprime-mortgage market. Companies such as Fiat SpA and European Aeronautic Defence & Space Co. complained that the declines are hurting exports. The Group of Seven said after its meeting on the weekend it's concerned ``sharp fluctuations'' in currency markets may hurt the global economy.

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