Fed policy makers tomorrow will keep their target rate at 1 percent, according to all 77 economists surveyed by Bloomberg News, half the European Central Bank's rate. Since August, the Fed has said it will keep rates low for ``a considerable period.''

``You have to scramble around to find reasons to buy the dollar at this point,'' said Steven Englander, chief foreign exchange strategist for North America at Barclays Capital Inc. in New York. Returns on U.S. investments, including bonds, ``clearly are not favoring the dollar.''

Against the euro, the dollar traded at $1.2202 at 10:22 a.m. in New York, from $1.2170 late Friday in New York. The dollar slid to as low as $1.7363 against the pound, its weakest since October 1992. Barclays two weeks ago forecast the dollar would reach $1.22 per euro within three months.

The U.S. currency, which has fallen to a record against the euro for seven straight days, may reach $1.30 by mid-2004, said Adam Cole, a currency strategist in London for Credit Agricole Indosuez SA. The dollar slid to its lowest level against the yen since November 2000, trading at 107.25 yen from 107.70 late Friday.

Rate Disadvantage

Currencies that earn higher interest rates, such as the Australian dollar and the British pound, are benefiting as investors seek greater returns. In Australia, where the central bank last week raised its rate to 5.25 percent, the currency rose to its highest in more than six years against the dollar.

The dollar is vulnerable when foreign investors find better opportunities outside the U.S. because the U.S. imports more than it exports, sending dollars overseas. If foreign recipients of dollars opt to sell instead of invest them, the currency's value drops.

``There is less foreign interest'' in U.S. securities than in recent years, ``and there's greater U.S. investor interest in exploring investment opportunities abroad,'' said Lara Rhame, a foreign exchange economist at Brown Brothers Harriman & Co. in New York. ``It's a one-two punch for the dollar,'' which will weaken to $1.40 per euro and 100 yen by the end of next year, said Rhame, a former Federal Reserve Bank of New York economist.

The Fed's Words

Investors will focus tomorrow on whether the Fed removes from its statement the commitment to keep rates low ``for a considerable period.'' Twelve of the 22 so-called primary U.S. government securities dealers expect the Fed to drop the phrase.

``If it does drop it, then we could see a rally in the dollar to below $1.20 against the euro,'' Steve Barrow, senior currency strategist in London at Bear Stearns told Bloomberg News in a televised interview. Still, ``it would be a short-lived rally.''

Sixty-nine percent of the 54 strategists, investors and traders polled Friday from New York to Tokyo advised buying or holding the euro against the dollar this week. European stocks declined as the euro's advance threatens to reduce sales from the U.S.

``If the market could find another currency to buy besides the euro it would gladly do it, because of concerns about the sustainability of European growth, particularly with a strong euro,'' Barclays' Englander said.

Investors are reluctant to buy the yen because of the prospect the Japanese central bank will sell the currency, he said.

Yen Advances

The yen rose against the dollar on expectations Japan's economy is strengthening. It has climbed 10.4 percent against the U.S. currency this year.

The Bank of Japan's quarterly Tankan index of business confidence, to be released Friday, probably rose to its highest level in three years, according to the median prediction in a Bloomberg News survey of 40 economists.

Foreign investors have been net buyers of stocks for 30 of the past 33 weeks, the Ministry of Finance said last week. The BOJ has responded to the yen's 10 percent rise this year by selling record amounts of its currency.

The Tankan ``will support Japan's recovery story and help the yen,'' said Jake Moore, currency strategist in Tokyo at Barclays Capital Inc. ``Any positive news and you get the BOJ sitting on the other side, but it can only slow the move. It can't stop the yen's strength.''

Ready to Strike

The Bank of Japan, on behalf of the Ministry of Finance, sold a record 17.8 trillion yen ($165.2 billion) this year. Zembei Mizoguchi, Japan's vice finance minister for international affairs, said the government would ``take action as needed'' in the foreign exchange market.

Japan doesn't set a specific target for the yen, said Hiroshi Watanabe, head of the Ministry of Finance's international department, according to the Independent newspaper. The ministry is ``looking to stabilize the currency in the range of 108 to 110 to the dollar,'' which he believes overvalued for the nation's industry, Watanabe was quoted as saying.

The Dollar Index, which charts the currency against a basket of six currencies of U.S. trading partners, was trading at 88.82, the weakest since January 1997. It remains 14 percent above its lowest level of the past decade, 78.19, in September 1992.

`Black Wednesday'

Britain's pound was last at current levels a month after the U.K. withdrew from the European Exchange Rate Mechanism, in which countries agreed to curb fluctuations in their currencies in preparation for the introduction of the euro.

John Major and Norman Lamont, then Britain's prime minister and chancellor of the exchequer respectively, pulled out of the system on Sept. 16, 1992. On a day the current chancellor, Gordon Brown, described as `Black Wednesday,' Lamont ordered the Bank of England to raise rates twice, to 15 percent from 10 percent, in a failed bid to prop up the pound.

George Soros's Quantum Fund made more than $1 billion betting efforts to defend the pound would fail. Withdrawal from the mechanism caused the pound to tumble against the mark as well as the dollar. Lamont resigned the following year and Major lost the next election to Tony Blair.