The dollar may fall for a fourth day on speculation reports on U.S. services and manufacturing will provide further evidence economic growth is slowing.

Factory orders probably dropped by the most in more than six years in October, while expansion in service industries cooled in November, cementing expectations that the Federal Reserve will cut interest rates. The dollar declined 1 percent versus the euro and 0.7 percent against the yen in the past week.

“I am pretty much dollar bearish,'’ said Michiyoshi Kato, a senior currency dealer in Tokyo at Mizuho Corporate Bank Ltd., a unit of Japan’s second-largest lender by assets. “Faced with a slowing U.S. economy, investors are certainly losing confidence in the dollar. It will likely head south.'’

The dollar traded at 115.31 yen at 6:35 a.m. in London from 115.26 yen in New York late yesterday. It was at $1.3331 per euro from $1.3343 yesterday, when it touched a 20-month low of $1.3367. The U.S. currency may fall to 114.50 yen and $1.3390 per euro today, Kato said.

The Institute for Supply Management’s non-manufacturing index due today may have declined to 55.5 in November from 57.1 the prior month, according to the median estimate of 68 economists surveyed by Bloomberg News. Factory orders likely plunged 4.2 percent, the most since July 2000, the U.S. Commerce Department may say today, a separate survey showed.

100 Percent Odds

Interest-rate futures contracts indicate 100 percent odds the Fed will lower rates to 5 percent from 5.25 percent at its March 21 meeting, compared with a 68 percent chance a week earlier. Policy makers next meet on Dec. 12 and are expected to keep rates unchanged for a fourth month, according to the median estimate of 36 economists surveyed.

Speculation the European Central Bank will keep raising rates in 2007 may boost demand for the euro. The central bank will probably lift rates a quarter-percentage point to 3.5 percent on Dec. 7, the fifth increase this year, a Bloomberg survey of 41 economists showed.

Royal Bank of Scotland Group Plc may say its services index for the 12 nations that share the euro held at 56.5 for a second month, according to the median forecast of 32 economists in a Bloomberg survey. A level above 50 indicates growth. The bank will release the index, based on a survey of purchasing managers by NTC Economics Ltd., at 9 a.m. in London today.

`Well Supported’

“The euro will be well supported going into the ECB policy meeting,'’ said Hiroyasu Hirayama, head of foreign-exchange sales in Tokyo at the Royal Bank of Scotland Group Plc. “The currency remains firm, helped by faster economic growth and prospects of further rate increases.'’

The European currency may rise to $1.3440 versus the dollar this week, Hirayama said.

The dollar may be bolstered by speculation investors will keep seeking the yield premium on offer on U.S. assets over those in Europe and Japan.

The Fed is unlikely to embark on an aggressive policy of cutting interest rates given signs that the housing market is stabilizing, said Adrian Foster, director of currency sales at Dresdner Kleinwort in Singapore. After raising borrowing costs in December, the ECB is likely to pause, boosting the U.S. currency, he said.

Dollar Yield Support

“The dollar’s rate advantage over most other major currencies still remains positive,'’ said Foster. The U.S. currency may advance to $1.3240 per euro and 116.00 yen this week, Foster said.

A report from the Labor Department this week may show U.S. employers added 100,000 workers in November, more than the 92,000 created in October, according to a Bloomberg survey of economists.

“I’m expecting a reasonable jobs number from the U.S.,'’ Foster said. “The Japanese are showing quite a healthy appetite for buying the dollar.'’

Japanese investors were net buyers of 374.6 billion yen ($3.24 billion) of foreign bonds during the week ended Nov. 25, the Ministry of Finance said in Tokyo on Nov. 30.

The Bank of Japan will its key overnight lending rate at 0.25 percent at the next two-day meeting that ends Dec. 19, according to 10 of 14 economists surveyed by Bloomberg from Nov. 16 to Nov. 24.

The yield premium investors earn on benchmark two-year U.S. Treasuries over similar-maturity German bunds was 0.89 percentage point. Compared with Japanese bonds it was 3.69 percentage points.

Source: Bloomberg / Kosuke Goto and Ron Harui