The U.S. currency sank to a record level against the euro and matched a three-year low versus the yen Friday after government figures showed the economy added 57,000 jobs in November. The report allayed speculation the Federal Reserve will suggest next week that it is closer to raising its benchmark interest rate, which is at a 45-year low of 1 percent.

The jobs data ``add more fuel to the fire for dollar bears'' as it may lead to ``less demand for U.S. assets,'' said Patrick Brodie, chief currency dealer in New York at Sumitomo Mitsui Banking Corp., a unit of Japan's second-biggest bank. ``When those inflows aren't present it results in a weaker dollar.''

The U.S. currency lost 1.4 percent on the week to $1.2171 per euro at 5 p.m. in New York on Friday, and fell as far as $1.2178, the weakest since the euro was introduced in January 1999. The dollar shed 1.8 percent this week against the yen, to 107.68 yen, and matched the three-year low of 107.54 it reached Nov. 19.

The dollar may weaken as far as $1.24 this year, Brodie said. ``The market continues to look for reasons to sell the dollar,'' he said.

Traders dumped the dollar as the November job creation figure fell short of the 150,000 median forecast of economists surveyed by Bloomberg News. Treasury yields sank on the report, making U.S. investments less attractive for fixed-income investors seeking higher yields.

Higher Returns

Investors receive higher returns on euro-denominated assets such as bank deposits. The yield on the two-year U.S. Treasury note is 1.87 percent, compared with 2.63 percent on German debt of the same maturity.

Slow job growth ``keeps yields a bit lower for longer, and that's not really going to help the dollar,'' said Robert Lynch, a currency strategist in New York at BNP Paribas, France's largest bank. The labor market ``may not be improving as quickly as some people had hoped.''

Lynch predicted the dollar will fall to $1.30 per euro by the end of 2004.

Traders sold dollars in the past week even after other U.S. reports showing manufacturing gained in November and durable goods orders surged in October.

The Fed will keep its target rate at 1 percent at a policy- setting meeting next week, according to all 58 economists surveyed by Bloomberg News. The European Central Bank, which is raising its forecasts for prices and economic growth, this week kept its target rate at 2 percent.

Rate Differentials

``All of a sudden people are starting to talk about rate differentials again,'' said Jan Faller, who manages international debt in New York at Deutsche Asset Management, with $660 billion in assets. He said he bought some euros about a week ago, as ``it was clear that the momentum wasn't really taking a breather.''

The euro may reach $1.25 in the first quarter, he said.

Government statistics don't indicate a weaker dollar is crimping U.S. consumers' appetite for imports. The trade gap grew to $41.3 billion in September, the Commerce Department said last month. Sales of Australian wine to North America surged 32 percent in October, Australian government statistics show, even as the nation's currency rose to the highest in almost six years.

``You need to have a return to attract foreign capital and the interest-rate side of the equation will not give you an attractive return'' in the U.S., said Paul Podolsky, a currency strategist at FleetBoston Financial Corp. in Boston.

Inflation

In the U.S., the personal consumption expenditures price index, a measure of inflation favored by Fed Chairman Alan Greenspan, rose at an annual pace of 2.3 percent in the third quarter. That's lower than the 2.4 percent originally reported.

The Dollar Index, which charts the dollar against a basket of six currencies of U.S. trading partners, fell as low as 89.05, the weakest since January 1997. The index reached a low of about 78 in 1992.

Traders may be reluctant to push the yen stronger than its 107.54 per dollar high for the year on concern Japan will sell its currency to stem its gains.

Zembei Mizoguchi, Japan's vice finance minister for international affairs, said the ministry is ``closely watching the market and will take action as necessary.''

The Bank of Japan, at the order of the Ministry of Finance, sold a record 17.8 trillion yen ($164 billion) this year to stem gains that threaten the country's export-led recovery.

``Any time the yen gets near or stronger than 108, the BOJ is likely to redouble its intervention efforts,'' said Koji Fukaya, currency strategist in Tokyo at Bank of Tokyo-Mitsubishi Ltd., a unit of Japan's third-biggest lender.

European Interest Rates

The European Central Bank will next week raise its projections for inflation and economic growth, a person who has seen the forecasts said yesterday. The bank will raise its inflation estimate for next year to 1.9 percent from a September projection of 1.6 percent and its 2004 growth forecast to 1.6 percent from September's 1.5 percent, the person said.

A sustained rally in the euro may reduce economic growth in Europe by as much as half a percentage point in the next two years, according to ECB forecasts.

The bank projects growth will accelerate to 1.6 percent in 2004, and to 2.4 percent in 2005, from 0.4 percent this year, said a person who has seen the estimates. An 8.1 percent gain in the euro against currencies of major trading partners would reduce those forecasts by a half-point, said the person, who spoke on condition of anonymity. The forecasts assume a euro rate of $1.17 for 2004 and 2005.