The dollar weakened against the euro and approached an eight-year low versus the yen as traders bet the Federal Reserve will lower interest rates by at least 75 basis points to avert a recession.

The currency traded within a cent of a record low against the euro as futures indicated 96 percent odds the Fed will cut its benchmark rate to 2.25 percent on March 18, 175 basis points more than the Bank of Japan's and 175 basis points less than the European Central Bank's. The U.S. currency weakened against a basket of major trading partners to near the lowest since the index began in 1973.

``What's been driving the market is U.S. economic developments and expected interest-rate differentials,'' said Thanos Papasavvas, head of currency management at Investec Asset Management in London. ``This is a weak-dollar story. We would expect the Japanese yen and euro to continue appreciating.''

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The dollar fell to 102.33 yen by 7:24 a.m. in New York, from 102.67 yen on March 7, when it slid to 101.43, the lowest since January 2000. It dropped to $1.5364 per euro, from $1.5355 at the end of last week, when it declined to $1.5459 a euro, the weakest level since the European single currency's debut in 1999.

The yen advanced 0.4 percent to 157.20 per euro as the Cabinet Office said Japan's equipment orders jumped 19.6 percent in January, the fastest pace in more than seven years.

The U.S. currency declined to $2.0197 against the pound, from $2.0134 on March 7, after a government report showed factory-gate in February inflation matched the fastest annual pace since 1991. The dollar also dropped 0.2 percent to 1.0233 against the Swiss franc and 0.5 percent to 5.1361 Norwegian krone.

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