Predictions that the US Federal Reserve will move to cut interest rates this years have contributed to a declining dollar.

Falling to an all-time low against its competitor currencies, the dollar traded at $1.3651 against the euro after dropping to a low of $1.3666 earlier yesterday. Against the Japanese currency, the dollar stood at 118.78 yen

Daiwa Institute of Research senior economist Yuji Kameoka told Bloomberg: "The slowing US economy will keep giving a body blow to the dollar."

He added that with the failing housing sector negatively impacting upon consumer spending, interest rates may be cut in August, while the dollar could slip to 116 yen by June.

Meanwhile, the pound rose to $2.0059, up from $2.0015 yesterday after a report showed that UK house prices were continuing their upward trend.

However, currency strategist Phyllis Papadavid forecast that unless the sterling growth momentum picked up, further gains against the dollar seemed unlikely.