Oct. 18 (Bloomberg) -- The dollar fell to a record low against the euro on speculation the worsening growth outlook in the U.S. will push the Federal Reserve to cut borrowing costs at the end of the month.

An index measuring the dollar against six major currencies sank to an all-time low after Bank of America Corp. said profit missed analysts' estimates, stoking concern a housing slump is hurting corporate earnings and growth. The yen rallied as investors trimmed riskier investments funded by loans in Japan. European equities and U.S. stock futures declined.

``The Fed needs to cut rates sooner rather than later,'' said Steven Butler, director of trading at Scotia Capital Inc. in Toronto. ``The risk of a U.S. recession is ever increasing, and the dollar can still fall a lot further.''

The dollar declined 0.6 percent to $1.4294 per euro, after earlier reaching an all-time low of $1.4305. The previous record was $1.4283 set on Oct. 1. The U.S. currency fell 1 percent to 115.46 yen at 8:47 a.m. in New York. It earlier reached 115.29, the lowest since Oct. 2. The dollar has dropped 7.7 percent against the euro and 3 percent versus the yen so far this year.

The New York Board of Trade's dollar index touched 77.5, the weakest since the index began in 1973.

The Fed cut its target rate for overnight loans between banks a half-percentage point to 4.75 percent on Sept. 18. Traders raised bets the Fed will reduce borrowing costs on Oct. 31, after a government report yesterday showed housing starts slumped to a 14-year low.

Interest-rate futures traded on the Chicago Board of Trade show a 70 percent chance the Fed will lower its target rate for overnight loans between banks a quarter-percentage point to 4.5 percent. The odds were 40 percent a week ago.

`A Weaker Dollar'

``The data suggests there will be a weaker dollar,'' said Thomas Stolper, an economist in London at Goldman Sachs Group Inc. ``The capital-flows situation remains negative and the dollar will remain under pressure.''

U.S. economic growth may slow to less than 1 percent next year as losses on loans to homeowners with poor credit erode consumer spending and bank earnings, said Eisuke Sakakibara, Japan's former top currency official, during an interview in Tokyo. Sakakibara was dubbed ``Mr. Yen'' because of his ability to influence the currency market during his 1997-1999 tenure at the Ministry of Finance.

Bank of America, the second-largest U.S. bank, said profit declined 32 percent in the third quarter. Citigroup Inc., the nation's biggest bank, reported a 57 percent decline in earnings three days ago and said mortgage delinquencies and consumer lending will deteriorate for the rest of the year.

To contact the reporter on this story: Min Zeng in New York at mzeng2@bloomberg.net .