The dollar rose against the euro and traded near a two-month high against the yen on speculation the Federal Reserve will signal tomorrow that it's close to pausing interest-rate cuts.

The U.S. currency headed for its first monthly advance versus the yen and euro since December as traders increased bets the Fed will stop lowering borrowing costs after a quarter- percentage point reduction tomorrow. New Zealand's dollar slid after a government report showed the nation's trade deficit unexpectedly widened.

``Basically, I think the Fed will be indicating that if we are not at the bottom, we're very close to the bottom of the rate cycle,'' said Simon Derrick, London-based head of currency strategy at Bank of New York Mellon Corp. ``The dollar is on the turn.''

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The dollar was at $1.5581 per euro by 9:52 a.m. in London, from $1.5657 yesterday in New York, for a monthly gain of 1.3 percent. It was little changed at 104.23 yen. The euro fell to 162.39 yen from 163.11.

Futures on the Chicago Board of Trade show a 22 percent chance that the Fed will hold the target rate for overnight lending between banks at 2.25 percent tomorrow, compared with 6 percent odds a week ago. The balance of bets is for a reduction of a quarter-percentage point. There is a 68 percent probability the rate will be held at that level at the Fed's June meeting.

The European common currency's decline accelerated as Deutsche Bank AG, the world's largest currency trader, reported its first quarterly loss in five years after writing down the value of loans for leveraged buyouts and asset-backed securities by 2.7 billion euros. Against the pound, Europe's single currency slid to 78.40 pence, from 78.62 pence yesterday.

`Excuse' To Sell

``Deutsche Bank's earnings report seems to have triggered euro-selling,'' said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. ``Some investors are using it as an excuse to sell the euro,'' trying to push it to $1.5550, he said.

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