The dollar declined for a second consecutive day against major currencies on growing expectation that the Federal Reserve will lower interest rates next year to boost the economy.

In currency trading early Wednesday, the euro was trading at $1.2871 from $1.2844 and the dollar was at ¥117.41, from ¥117.92.

The falls follow a reduced forecast for 2007 US growth from presidential advisors and Federal Reserve minutes which showed that all but one of the 12 regional banks voted not to boost the discount rate.

Clifford Bennet of currency forecasting firm FxMax said that the dollar will fall as low as ¥114 and €1.3150 by the end of the year.

"The outlook for the dollar is weaker," he told Bloomberg. "Rising market perception that rates will be cut in the US could be enough to get the dollar snowballing lower."

A slowing housing market was the principle reason for the reduced growth forecast, with GDP predicted to increase 2.9 per cent, down from 3.1 per cent this year.