The dollar fell on Monday to its lowest level in seven weeks against the euro and yen on fears that weak U.S. corporate earnings will push the economy closer to recession, requiring the Federal Reserve to slash interest rates.

Some of Wall Street's largest banks will be reporting their earnings this week, beginning with Citigroup on Tuesday, and currency dealers will be watching for indications of how much the credit crisis is damaging their bottom lines and increasing the risk of prolonged economic weakness.

Federal Reserve Chairman Ben Bernanke's comments last week that the central bank stood ready to take "substantive additional action" to maintain growth cemented expectations for a half-percentage point cut in the Fed's benchmark interest rate to 3.75 percent.

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Futures are also reflecting a 50/50 chance that the Fed rate could reduce its interest rate by three-quarters of a point between now and the January 29-30 meeting, giving a fresh reason for dealers to sell dollars.

"It's the reality that the Fed is going to cut 50 and there's an interest-rate play between the currencies," said Andrew Goldberg, managing director of foreign exchange with BNP Paribas in New York.

The euro rose as high as $1.4914 according to Reuters data, breaching the $1.49 level for the first time in seven weeks and closing in on a record high of $1.4966. It last traded at $1.4874, up 0.7 percent from late Friday.

A 50-basis point cut would put the benchmark U.S. rate below the key euro-zone interest rate for the first time in more than three years. In contrast to the Fed, euro zone policy-makers have remained hawkish, stressing risks from inflation.

The dollar fell more than 1 percent to a record low of 1.0888 Swiss francs, before paring some of those losses. It last traded at 1.0925 Swiss francs.

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