SEPT 26 FRIDAY

Dollar Falls, Set for Weekly Decline, as U.S. Debates Rescue .

The dollar fell, heading for a second weekly decline against the

yen, as U.S. lawmakers disagreed over a finance industry

rescue plan and Washington Mutual Inc. became the nation's

biggest bank to collapse.

The greenback was on course for a weekly loss against the euro

after a group of Republicans opposed to the Treasury's $700

billion asset-purchase plan entered negotiations with an

alternative proposal. The yen headed for weekly gains

against the Australian and New Zealand dollars as investors

pared so- called carry trades on concern the talks will drag on.

The dollar fell to 105.66 yen as of 2:18 p.m. in Tokyo from

106.56 late yesterday in New York, taking this week's drop

to 1.7 percent. It declined to $1.4637 per euro from $1.4609

yesterday and $1.4466 Sept. 19. The euro bought 154.61 yen,

down 0.7 percent from late yesterday and 0.6 percent for

the week.

The U.S. government closed Seattle-based Washington Mutual,

which faced $19 billion of mortgage-related losses, after customer

withdrew $16.7 billion since Sept. 15, the Office of Thrift

Supervision said in a statement. JPMorgan Chase & Co.,

the third-biggest U.S. bank by assets, agreed to acquire

WaMu's deposits and branches for $1.9 billion.

The collapse of Lehman Brothers Holdings Inc. and the U.S.

government takeover of insurer American International

Group Inc. have helped cause credit markets to seize up.

The three-month London interbank offered rate, or Libor,

for dollars rose to 3.77 percent yesterday, the highest level

relative to the Fed's target rate on record.

Futures contracts on the Chicago Board of Trade showed an 86

percent chance the Fed will cut its 2 percent target rate for

overnight lending between banks by a quarter-percentage

point at its meeting on Oct. 29, compared with zero chance

a month ago.

The dollar has fallen 5.2 percent against the euro since touching

a one-year high of $1.3882 on Sept. 11. The dollar reached

$1.6038 on July 15, the weakest level since the European

currency made its debut in 1999.