The dollar fell to its lowest point this year versus the euro yesterday ahead of an economic report expected to show that American consumer confidence has slipped.

The dollar fell to $1.3314 yesterday versus the euro, the lowest since December 8th, and at ¥116.76. Analysts said it could potentially fall to ¥115 over the next month.

The differential on US Treasuries against comparable German bunds fell to its smallest in more than two years yesterday, as a series of reports rocked US confidence.

Continuing problems in the US housing market have also undermined the currency, with fears that high levels of mortgage repossession could tip the economy into recession.

A large number of credit-impaired American homeowners, who are facing mortgage rates as high as 12 per cent as their introductory deals expire, are fuelling the concerns.

"There's doubt about how strong the US economy is," Michael Thomas of ICAP Australia told Bloomberg.

"The numbers out of the US we're seeing are on average a little bit weaker, which generally means weakness for the dollar."