The dollar fell to a record low against the euro and a basket of major currencies on Wednesday after the Federal Reserve reported U.S. growth was likely to slow in 2008, underscoring market expectations for more monetary easing.

The yen rose to a two-year high against the dollar as a tumble in Asian shares amid growing worries about the health of the U.S. economy prompted investors to further cut risky positions in carry trades.

Besides market expectations that the Federal Reserve will cut interest rates further, the dollar has been under pressure from growing speculation that Middle East oil exporters, including Saudi Arabia, may ditch or revalue their dollar pegs.

By 3:24 a.m. EST, the euro had given up some of its gains to trade down 0.1 percent on the day at $1.4801, after striking a record high of $1.4856.

The dollar declined about 0.8 percent to 109.06 yen, falling as low as 108.81 yen, the lowest since September 2005.