By Stanley White Dec. 11 (Bloomberg) -- The dollar fell to a two-week low against the euro as a bill designed to prevent the collapse of U.S. automakers met with opposition in the Senate. The U.S. currency also declined versus the yen and the British pound after Republican Senator George Voinovich said yesterday that legislation to provide $14 billion in federal loans to General Motors Corp. and Chrysler LLC may not have enough votes from his party. South Korea’s won climbed for a fifth day after the central bank cut interest rates to a record low to prevent the economy from slipping into a recession. “No one is sure how the automaker rescue package will turn out, and that’s making some people nervous,” said Saburo Matsumoto, senior manager of foreign-exchange sales at Sumitomo Trust & Banking Co. “The global economy clearly has problems. This will pressure the dollar to go lower against the yen.” The dollar fell to $1.3085 per euro as of 2:27 p.m. in Tokyo from $1.3023 late yesterday in New York. The currency declined to 92.40 yen from 92.76. Against the pound, the dollar weakened to $1.4906 from $1.4785. The euro was little changed at 120.90 yen. The dollar may fall to 91 yen today, Tokyo-based Matsumoto said. The South Korean won rose 3.6 percent to 1,343.25 per dollar, after touching 1,345.50, the strongest level in a month. The Bank of Korea lowered its benchmark rate a larger-than-expected 1 percentage point to 3 percent. Currency Swaps Japan will expand its currency-swap agreement with South Korea to help its neighbor obtain foreign exchange, Naoyuki Shinohara, vice finance minister for international affairs, told reporters in Tokyo today. Policy makers are still discussing the amount of the swap increase, Japan’s top currency official said. The won is down 30 percent against the dollar this year, Asia’s worst performer. The yen gained this year against all 178 currencies tracked by Bloomberg as the global recession encouraged Japanese investors to repatriate funds. Japan’s currency jumped 21 percent versus the dollar, 35 percent against the euro and 66 percent against Brazil’s real as the financial crisis prompted investors to reverse so-called carry trades, where they purchase higher-yielding assets funded in countries where borrowing costs are lower. Japan’s benchmark rate of 0.3 percent is the lowest among major economies. The dollar gained 12 percent against the euro this year as the credit-market seizure and $980 billion of losses on mortgage- related securities worldwide led investors to repatriate overseas investment to the U.S. and seek shelter in government debt. Automaker Bailout U.S. President George W. Bush’s administration is lobbying Republican lawmakers to support a plan to rescue General Motors and Chrysler, officials said. Legislation in the House of Representatives calls for the appointment of a car czar who may force the automakers into Chapter 11 bankruptcy if the companies don’t come up with a restructuring plan by March 31. The dollar may extend its decline as the U.S. government increases its budget deficit by spending “trillions of dollars” to revive the economy, according to Bill Gross, manager of the world’s biggest bond fund at Pacific Investment Management Co. in Newport Beach, California. “There’s some risk” for the dollar to weaken, said Gross in an interview on Bloomberg Television yesterday. “It is fair to say other economies are doing much the same thing. The dollar doesn’t have to go south if all the economies reflate at the same time.” Dollar Index The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, fell 0.4 percent to 85.188. It touched 88.463 on Nov. 21, the highest since April 2006. State Street Global Markets recommended investors erase bets that the dollar will gain versus the euro as major central banks interest rates are “nearing the bottom.” Policy makers in Canada, Europe, the U.K., Sweden, Australia and New Zealand lowered interest rates this month. “Narrowing interest-rate differentials will soon fade as a force in the foreign-exchange market,” Dwyfor Evans, a Hong Kong-based currency analyst at the company, wrote in a research note to clients yesterday. The Swiss franc traded at 1.1956 per dollar from 1.1987. It was also quoted at 1.5617 per euro, little changed from yesterday. Swiss Rates The Swiss National Bank’s Governing Board, led by Jean- Pierre Roth, may reduce the three-month Libor target by 50 basis points to 0.5 percent, said 13 of the 18 economists surveyed by Bloomberg News before the central bank’s decision at 9:30 a.m. in Zurich today. One predicted a quarter-point cut and the rest expected the target to be left at 1 percent. Libor, or the London interbank offered rate, is the interest banks charge each other for loans in francs. “The SNB is on the cusp of becoming the first European central bank to adopt more unconventional policy measures,” Citigroup Inc. analysts led by London-based Jim McCormick wrote in a research note yesterday. “Against this backdrop the Swiss franc is set to weaken further.” To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net.

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