Dollar tumbles to record lows as Fed looms

By Lucia Mutikani

NEW YORK (Reuters) - The dollar fell to fresh lifetime lows versus the euro and a basket of currencies on Friday as investors fretted an anticipated Federal Reserve interest rate cut next week would not be the last.

U.S. crude oil's surge to record highs above $92 a barrel and gold's jump to 28-year peaks also hurt the dollar, boosting commodity currencies such as the Australian dollar which hit a 23-year high against the greenback.

"The fact that the 25 basis points is already priced into the market is going to be a double negative for the dollar because it will be a loss of the interest rate foundation and it's going to suggest further cuts," said Ashraf Laidi, chief currency strategist at CMC Markets in New York.

Against the backdrop of weak economic data and hefty losses by the country's big financial institutions, U.S. interest rate futures are fully reflecting a 25 basis points cut in the fed funds rate target to 4.50 percent next Wednesday, while the odds for a half a point reduction are around 55 percent.

"The U.S. central bank outlook is for a 50 basis point cut by the end of the year," said Brian Taylor, senior currency trader at M&T Bank in Buffalo, New York. "Even if they only do 25 basis points here (in October), the feeling is they will do another 25 basis point cut in December."

In early afternoon New York trade, the euro was trading up 0.5 percent at $1.4388, after racing to a record high of $1.4393, according to Reuters data.

The dollar index, which measures the greenback's value against a basket of six major currencies, dropped as low as 76.977.DXY, the lowest since its post-Bretton Woods inception over 30 years ago.

It was last trading 0.3 percent down at 77.019.