Feb. 28 (Bloomberg) -- The dollar fell to a record low against the euro for a third straight day as a weakening U.S. labor market and slower-than-forecast economic growth bolstered bets the Federal Reserve will cut interest rates through June.

The dollar also approached a 2 1/2-year low versus the yen and dropped to a record low against the Swiss franc, deepening its losses after Fed Chairman Ben S. Bernanke said it was ``fair'' to say it was tougher for the bank to respond now than to the recession of 2001. The yen rose against its major counterparts as falling stocks led investors to cut holdings of higher-yielding assets funded with carry trades in Japan.

``We are on the way to recession,'' said Robert Fullem, a vice president of U.S. corporate currency sales at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York. ``The trend is for a weaker dollar.''

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The U.S. currency touched $1.5196 per euro, the weakest since the common currency's 1999 inception, before trading at $1.5185 at 11:32 a.m. in New York, from $1.5120 yesterday. The dollar fell to 105.50 yen from 106.49, touching the lowest since Jan. 23, when it reached a 2 1/2-year low of 104.97 yen. The dollar fell as low as 1.0515 francs.

The U.S. Dollar Index, which tracks the currency against six major counterparts, touched the lowest since its start in 1973. The index, traded on ICE Futures in New York, fell to 73.80, as the Labor Department said initial jobless claims climbed by 19,000 to 373,000 in the week ended Feb. 23. The U.S. economy grew at an annual rate of 0.6 percent last quarter, the government said separately, less than the 0.8 percent median forecast in a Bloomberg survey.

Rand Falls

The U.S. currency has dropped 13 percent versus the euro in the past year as subprime-mortgage losses, the worst housing market in 25 years and soaring credit costs spurred the Fed to cut rates five times since September.

South Africa's rand was the worst performer among the 16 major currencies, falling 1.4 percent against the dollar today as mounting concern that the U.S. will fall into a recession led traders to pare bets on currencies tied to global growth and demand for commodities.

The yen advanced 2 percent to 14.01 per rand and gained 1 percent versus the New Zealand dollar as investors reduced carry trades, where they get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between them.

Japan's benchmark rate of 0.5 percent, the industrialized world's lowest, compares with 11 percent in South Africa, 8.25 percent in New Zealand and 7 percent in Australia.

The Standard & Poor's 500 Index fell 1.2 percent.

`Strong Dollar'

President George W. Bush said his administration supports a ``strong dollar,'' and the currency's value will be reflected by markets as the economy grows. He spoke at a news conference at the White House.

The so-called synthetic euro, which estimates the European currency's value before 1999, reached the strongest since at least January 1989, when Bloomberg's data on the measure begin.

The euro is 30 percent above its debut level of about $1.17, and up 84 percent from a record low of 82.30 U.S. cents in October 2000.

The dollar's decline gained momentum this week after Fed Vice Chairman Donald Kohn said on Feb. 26 that turmoil in credit markets and the possibility of a slower economy pose a ``greater threat'' than inflation.

`Downside Risks'

The dollar weakened past $1.51 per euro for the first time yesterday after Bernanke said the bank ``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.

Bernanke appeared today before a Senate panel.

``He said the Fed is in a more difficult situation than 2001,'' said Alan Ruskin, head of international currency strategy in North America at RBS Greenwich Capital Markets Inc. in Greenwich, Connecticut. ``He sent a signal that the Fed may be pushing on a string, and they will have to cut rates more aggressively.''

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