Nov. 7 (Bloomberg) -- The dollar fell to a record low versus the euro and the weakest since 1981 against the pound after Chinese officials signaled plans to diversify the nation's $1.43 trillion of foreign exchange reserves.

The U.S. dollar also declined to the weakest versus the Canadian dollar since the end of a fixed exchange rate in 1950 and a 23-year low against the Australian dollar on surging oil and gold prices as investors hedged against the U.S. currency's weakness. The New York Board of Trade's dollar index dropped to 75.077, the lowest since the gauge started in March 1973.

``The dollar is suffering a confidence crisis,'' said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon in New York, the world's largest custodian bank with over $20 trillion in assets under administration. ``The dollar is on the ropes. Comments from China about diversification and surging oil prices pushed the dollar to new lows.''

The U.S. currency fell 1 percent to $1.4697 per euro at 9:03 a.m. in New York and touched $1.4731, the lowest since the 13-nation currency debuted in January 1999. The dollar weakened 1.4 percent to 113.16 yen. The euro fell 0.4 percent against the yen to 166.32. The dollar will weaken to $1.54 per euro by the end of June, according to Woolfolk.

The dollar also fell to an all-time low against the synthetic euro, a theoretical value that estimates where the currency would have traded before its inception. The prior record was $1.4557 set in 1992.

`Losing Its Status'

``We will favor stronger currencies over weaker ones, and will readjust accordingly,'' Cheng Siwei, vice chairman of China's National People's Congress, told a conference in Beijing.

The dollar is ``losing its status as the world currency,'' Xu Jian, a central bank vice director, said at the same meeting.

Chinese investors have reduced their holdings of U.S. Treasuries by 5 percent to $400 billion in the five months to August. China Investment Corp., which manages the nation's $200 billion sovereign wealth fund, said last month it may get more of the nation's reserves to invest to improve returns.

The dollar's decline helped drive the price of crude oil to a record $98.62 a barrel and gold to a 27-year high, encouraging investors to buy assets in commodity-producing nations.

The Canadian dollar advanced to as high as $1.1040. The Australian dollar touched 93.98 U.S. cents, the highest since 1984, from 92.88 U.S. cents yesterday. The rand rose to as high as 6.4294 per dollar, the highest since May 2006.

Trade Deficit

The dollar's 10.2 percent drop against the euro this year boosted the competitiveness of U.S. exports, helping shrink the nation's trade deficit to $57.6 billion in August, the smallest since January.

``Further weakening of the dollar is very likely,'' said Teis Knuthsen, the Copenhagen-based head of foreign-exchange, fixed-income and derivative research at Danske Bank A/S, the Nordic region's second-biggest lender. China may ``diversify out of dollar holdings.''

U.S. 10-year Treasury notes rose today as mounting credit- market losses and declines in stocks pushed investors to the safety of government debt.

``The world's currency structure has changed,'' Xu said at the conference in Beijing. Cheng, speaking to reporters after his speech, said his comments don't mean China will buy more euros. The National People's Congress, China's legislature, isn't involved in setting currency policy.

`Not Always Accurate'

``Cheng has a history of speaking out on a range of financial market and economic developments, and his comments are not always accurate,'' said Glenn Maguire, chief Asia economist at Societe Generale SA in Hong Kong.

Cheng's remarks on Jan. 30 that China's stock rally was a ``bubble'' caused the benchmark index to fall the most in almost two years the following day. The Shanghai and Shenzhen 300 Index, then over 2,500 points, has since climbed above 5,300.

The European Central Bank will keep its key rate at 4 percent tomorrow, according to all 61 economists surveyed by Bloomberg News. Data yesterday showed manufacturing orders in Germany fell more than expected in September.

Europe's single currency will trade at $1.43 versus the dollar by year-end, according to the median forecast of 42 analysts and brokerages surveyed by Bloomberg News.

To contact the reporter on this story: Min Zeng in New York at mzeng2@bloomberg.net ; Agnes Lovasz in London at alovasz@bloomberg.net .