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The dollar dropped to a four-month low Monday against the yen and slid against the euro amid increasing concerns about the US economy on the eve of a Federal Reserve interest-rate meeting. The euro was changing hands at 1.3793 dollars around 2100 GMT, up from 1.3775 late Friday. In early Tokyo trade, the dollar fell to 117.18 yen.

Analysts are expecting that the US Federal Open Market Committee will leave the key federal funds rate unchanged at 5.25 percent, where it has been for 13 months.

"If this is not delivered, it is likely that we see further selling pressure for the dollar as the market analyzes the Fed as falling behind the curve, failing to halt a financial problem and probably even inducing a harsher economic slowdown," BNP Paribas analysts said.

Fears that the Fed will not cut interests rates anytime soon have been made worse by the weak nonfarm US payrolls and a potential spillover effect from tightening in credit markets.

The euro was faring well across the board, ramping up to a two-month high against the pound as the single European currency benefited from safe-haven flows as well as much stronger-than-expected German industrial orders data in the morning.
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"The discovery of a UK farm with foot and mouth has brought back images of 2001 and selling of the pound against all currencies," said Andrew Busch, an analyst at BMO Capital Markets.

Elsewhere, the yen was also doing well. Ongoing credit problems and stock market losses had benefited the yen overnight as investors edged away from risky carry trades -- where money is borrowed in low-yielding currencies such as the yen in order to invest in higher-yielding currencies elsewhere.