Feb. 27 (Bloomberg) -- The dollar fell below $1.51 per euro for the first time on mounting speculation a slumping economy will force Federal Reserve Chairman Ben S. Bernanke to cut interest rates through mid-year.

An index that tracks the currency against six major counterparts dropped to the lowest since the gauge started in 1973, as European Central Bank policy maker Axel Weber said investors expecting rate cuts in the region are underestimating inflation. The U.S. currency fell to an all-time low against the Swiss franc and to 23-year lows versus the Australian and New Zealand dollars.

``This is a new chapter for the dollar,'' said Russell LaScala, head of foreign-exchange trading in North America at Deutsche Bank AG in New York. ``You are seeing divergence of central banks' views.''

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The currency touched $1.5144 per euro, the weakest since the common currency's debut in 1999, before trading at $1.5129 at 12:04 p.m. in New York, from $1.4974 yesterday. It fell to 106.37 yen from 107.28 yen, coming within about 1 percent of a 2 1/2-year low reached in January, and dropped as low as 1.0624 francs, from 1.0756. The euro rose to 160.99 yen from 160.67.

LaScala said dollar-selling gained momentum yesterday after Fed Vice Chairman Donald Kohn said turmoil in credit markets and the possibility of slower economic growth pose a ``greater threat'' than inflation. The currency has slid 4 percent against the euro in the past three weeks as the housing slump deepened and consumer confidence tumbled, leading traders to exit bets on a dollar rebound. The dollar will rise to $1.45 per euro by mid- year, according to the median forecast in a Bloomberg survey.

Bernanke Speaks

The dollar weakened past $1.51 per euro for the first time today after Bernanke said the Fed ``will act in a timely manner'' to insure against ``downside risks'' to the economy. His remarks came in testimony to the House Financial Services Committee in Washington. The Fed watches the dollar ``very carefully,'' and has no ``target'' for it, he also said.

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