The dollar slid to a fresh record low against the euro and a basket of currencies on Friday, pressured by the growing view that a slowdown in the U.S. economy will force another cut in interest rates this month.

Markets were jittery ahead of a meeting of Group of Seven finance ministers and central bankers starting later in the day in Washington.

There has been some speculation that their communiqué could refer to the weak dollar, the weak yen or even the strong euro.

But most analysts don't expect the G7 to change its message on currencies, and say the dollar should be free to continue its downward trend once the event risk of the meeting has passed.

Weak U.S. data, coupled with poor results from several heavyweight U.S. banks, have fuelled expectations of a growth-boosting but dollar-negative rate cut from the Federal Reserve on October 31.

The dollar's gloom continues ... At this point we believe that a new rate cut, probably of 25 basis points (to 4.5 percent), will be announced at the end of the month, said Roberto Mialich, FX strategist at UniCredit in Milan.

We are seeing some position squaring ahead of G7 especially ... (but) despite the pressure seen on the dollar, we don't think the G7 will agree something particular to rescue the poor greenback, he added.

By 6:35 EDT the euro was flat on the day at $1.4281, having hit a lifetime high of $1.4319, according to Reuters data, in the Asian session.

The dollar index, a measure of its value against six major currencies, was also flat on the day but earlier in Asia hit 77.406, its lowest ever since its inception over 30 years ago after the Bretton Woods exchange rate agreement broke down.

DOLLAR WOES

A fall in housing starts to 14-year lows, soft regional manufacturing data, a steep rise in the number of weekly jobless claims and a 32 percent fall in quarterly earnings from Bank of America (BAC.N: Quote, Profile, Research) this week all helped lift the implied chances of a Fed rate cut on October 31 to around 70 percent.

If the dollar was the main loser from the shift in rate expectations -- U.S./euro zone yield differentials are now at their narrowest in over three years -- the low-yielding yen was the biggest beneficiary from the rising risk aversion.

Adding to the dollar's woes, oil hit a new record high of $90 a barrel overnight, while gold -- which tends to be negatively correlated with the U.S. currency -- hit a 28-year high of $770 an ounce.

Disappointing U.S. economic data over the coming days, particularly on the housing market, is likely to increase Fed rate cut expectations, keeping the dollar on the defensive, Commerzbank Corporates & Markets said in a research note.

At present a dollar recovery seems outside the realms of possibility. We therefore think that in the short-term new all-time highs in euro/dollar at $1.4350 and above are possible.

The yen rose to a three-week high of 114.85 per dollar on pre G7 worries. But it then reversed gains to stand at 115.73, as risk aversion was in part calmed by a stable performance on European bourses.

A trader in London said the move back up in dollar/yen was accelerated by the pair breaking through intra day stop-loss levels at 115.50.

The euro also recovered from a session low of 164.22 to stand at 165.15.