NEW YORK (Bloomberg) — The dollar declined to a two-week low against the euro and the yen after the Federal Reserve gave no indication it will start reversing the most aggressive series of cuts in two decades.

The greenback dropped for a second week as the Dow Jones Industrial Average headed for the worst June since the Great Depression and crude oil surged to a record. The European Central Bank is expected to raise interest rates by a quarter- percentage point on July 3, the same day a government report is forecast to show the US lost jobs in June for a sixth month.

"It's a combination of less hawkishness than expected from the Fed and a fairly sharp breakdown in equities," said Richard Franulovich, a senior currency strategist at Westpac Banking Corp in New York. "That's a pretty toxic mix for the dollar."

The dollar fell 1.2 percent to $1.5794 per euro, from $1.5606 on June 20, after reaching $1.5791 on Friday, the weakest since June 9. It dropped 1.1 percent to 106.15 yen, from 107.33, touching 105.87 yesterday, also the lowest since June 9. The euro was little changed at 167.62 yen after touching the all-time high of 169.46.

Futures on the Chicago Board of Trade show a 24-percent chance that the Fed will increase the target rate for overnight lending between banks by a quarter-percentage point at its next meeting on August 5, compared with 40-percent odds a week ago. The central bank held the benchmark rate at two percent on June 25, saying in its statement that "uncertainty" about the inflation outlook remains high.

The central bank cut borrowing costs seven times beginning in September from 5.25 percent to prevent the housing slump and credit market losses from dragging the world's largest economy into a recession.

The dollar advanced to a one-month high against the euro on June 13, four days after Fed chairman Ben Bernanke said the risk of a "substantial downturn" had diminished and accelerating inflation "would be destabilising for growth."

The Canadian dollar appreciated to a three-week high against the US dollar this week as crude oil rose above $142 per barrel. The loonie, named after the bird on the one-dollar coin, increased 0.6 percent to C$1.0105 per US dollar and touched C$1.0049 yesterday, the highest since June 3.

Norway's krone rose 1.7 percent to 5.0645 per dollar, reaching 5.0421 yesterday, the strongest since June 9.

Commodities such as crude oil and gold account for 54 percent of Canada's exports. Oil is Norway's biggest export.

The ECB is poised next week to raise its four-percent main refinancing rate for the first time since June 2007, according to the median forecast of 57 analysts surveyed by Bloomberg News. The US Labour Department will probably report that US non- farm payrolls fell by 60,000 in June, according to the median forecast of 64 analysts in a separate survey.

The euro pared its weekly gain as ECB council member Miguel Angel Fernandez Ordonez, who is also governor of the Bank of Spain, told reporters in Rome on Friday that an interest-rate increase by the ECB "is not certain, but possible." ECB president Jean-Claude Trichet said on June 9 that rates my rise by a "small amount".