The dollar fell, headed for a fourth weekly loss against the euro, on speculation a U.S. government report will show slower employment growth and increase pressure on the Federal Reserve to cut interest rates.The currency was also poised for the biggest loss in 10 weeks against the British pound after analyst downgrades of Citigroup Inc. caused U.S. stocks to tumble. The yield advantage for holding German two-year bunds over similar-maturity U.S. Treasuries widened to the highest since April 2004.We're in a bearish dollar environment,'' said Sue Trinh, senior currency strategist in Sydney at RBC Capital Markets, the second-most accurate forecaster of exchange rates in the second quarter in Bloomberg News surveys. ``The Fed is trending toward a neutral bias. That doesn't rule out further rate cuts and we've seen soft data out of the U.S.''The dollar weakened to $1.4472 per euro at 7:45 a.m. in London from $1.4425 in New York yesterday and $1.4393 a week ago. It reached $1.4504 on Oct. 31, the lowest since the European currency's debut in January 1999. The dollar may fall to $1.46 by year-end, Trinh forecast.The euro extended its gains after European Affairs Minister Jean-Pierre Jouyet said in an interview with Les Echos that a strong currency ``allows for the reducing of inflationary tendencies, limiting the consequences of rising oil prices.U.S. employers added 84,000 workers to nonfarm payrolls last month following an increase of 110,000 in September, based on the median forecast in a Bloomberg News survey. The government will release the report at 8:30 a.m. in Washington.CIBC World Markets this week said investors should sell shares of Citigroup, the biggest U.S. bank, because the company may not be able to pay its dividend unless it sells assets. Morgan Stanley and Credit Suisse Group also cut their ratings.

Pound Gains

The U.S. currency fell 1.5 percent this week to $2.0831 versus the pound, the biggest decline since Aug. 24. It rose 0.3 percent this week to 114.55 yen. The dollar may drop to 113 yen and $1.45 against the euro today, Shimizu forecast.The dollar was also poised for the biggest decline in six weeks against the Canadian dollar after the Institute for Supply Management yesterday said its factory index fell to 50.9 in October, the lowest in seven months. A Commerce Department report showed Americans increased spending by a lower-than- expected 0.3 percent in September.China's yuan headed for the biggest weekly gain in two years against the dollar on speculation the central bank wants the currency to appreciate to tackle inflation. The yuan gained 0.52 percent to 7.4564 per dollar in the week.

Fukui Comments

The spread, or difference in yield, between benchmark two- year U.S. and Japanese bonds, among securities most sensitive to monetary policy changes, narrowed to 2.93 percentage points yesterday, the least since December 2004. The extra yield on German two-year notes over their U.S. equivalents has widened to 2.26 percentage points, the most since April 2004.The yen headed for a weekly decline against 8 of the 16 most-active currencies including the pound and the Brazilian real, favorites for the so-called carry trade because of their higher yields. Japan's currency fell 1.8 percent to 238.61 per pound from a week earlier, and dropped 1.5 percent to 65.5252 versus the real from last week. The benchmark rate in the U.K. is 5.75 percent and in Brazil it is 11.25 percent.The yen fell the most against the Australian dollar today as Bank of Japan Governor Toshihiko Fukui reiterated the central bank will raise rates gradually based on developments in the economy and prices. The BOJ this week kept rates on hold at 0.5 percent and forecast slower economic growth and abandoned a prediction that consumer prices will increase this year.

Carry Trades

``The Japanese economy is sluggish, and there is a big question mark whether the BOJ can raise rates by the end of March,'' said Ryohei Muramatsu, manager of Group Treasury Asia at Commerzbank in Tokyo. ``There's no catalyst for yen-buying.''Japan's currency may fall to 115.10 a dollar and 165.90 a euro today, he forecast.The yen strengthened against all 16 major currencies yesterday as the U.S. Standard & Poor's 500 Index fell 2.6 percent. Australia's dollar weakened 3 percent against the yen and New Zealand's currency lost 2.6 percent. South Africa's rand dropped 2.3 percent.The currencies have been favored destinations for investors in the so-called carry trade, which involves borrowing funds at low rates in countries such as Japan and buying higher-yielding assets. The risk is that currency moves erode those profits.One-month implied volatility for the yen rose to 9.49 percent today, from 9.05 percent yesterday. Dealers quote implied volatility, a gauge of expectations for currency moves, as part of pricing options. Higher volatility may discourage carry trades.