LONDON (AFP) — The dollar fell against the euro on Monday, the eve of US presidential elections and ahead of a rate decision from the European Central Bank later in the week. In London morning trading, the euro rose to 1.2854 dollars from 1.2750 late in New York on Friday. Against the Japanese currency, the dollar climbed to 99.31 yen from 98.44 on Friday. "Not that it has ever been dull recently, but the coming week could prove especially interesting for markets," said Calyon economist Sebastien Barbe. "Much of the fixation will be on the central bank meetings later in the week, with both the Bank of England and the ECB expected to cut rates by 50 basis points." Ahead of the rate meetings on Thursday, investors were awaiting the outcome of Tuesday's US presidential elections with a decisive victory for Democrat Barack Obama seen by some analysts as positive for the dollar in the immediate term. "In the short-term... an Obama victory could be seen as dollar positive as it will enable Washington to respond more proactively on crisis management," David Forrester, a currency strategist with Barclays Capital, told Dow Jones Newswires. US polls show Obama well in front of Republican rival John McCain. Following the elections, the European Central Bank is widely expected to cut its main lending rate sharply this week to boost the eurozone economy. "We look for the ECB to reduce rates by 50 basis points at its November meeting, and to follow up with a further 50 basis-point cut no later than January," said Bank of America senior economist Holger Schmieding. A half-point reduction Thursday would take the ECB's main lending rate to 3.25 percent. The 15-nation eurozone economy is slumping heavily, with a key purchasing manager's index falling to a record low in October and business confidence hitting its weakest level since November 1993. The economy contracted by 0.2 percent in the second quarter. If it shrinks in the third quarter the eurozone will be in a technical recession -- classified as two straight quarters of contraction. In morning trading here on Monday, the euro changed hands at 1.2854 dollars against 1.2750 late Friday, at 127.44 yen (125.37), 0.7923 pounds (0.7933) and 1.4861 Swiss francs (1.4745). The dollar stood at 99.31 yen (98.44) and 1.1583 Swiss francs (1.1595). The pound was at 1.6201 dollars (1.6069). On the London Bullion Market, the price of gold increased to 735.38 dollars an ounce from 730.75 dollars late on Friday.

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