By Yoshiaki Nohara and Ron Harui Feb. 23 (Bloomberg) -- The dollar fell against the euro on prospects the Federal Reserve will hold its target interest rate near zero to sustain a recovery in the world’s biggest economy. The U.S. currency dropped against 12 of its 16 major counterparts on speculation Fed Chairman Ben S. Bernanke will tell Congress tomorrow that last week’s increase in the discount rate isn’t intended to drive up borrowing costs. The euro rose after the Ail-Ittihad newspaper reported Dubai provided more funds to Dubai World, easing concern that European banks will incur losses on loans to the Gulf emirate. “Fed rate-hike expectations have continued to ease,” said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. “This is providing something of a drag for the dollar.” The dollar fell to $1.3635 per euro at 2:12 p.m. in Tokyo from $1.3596 in New York yesterday. It touched $1.3444 on Feb. 19, the highest since May 18. The greenback fetched 91.08 yen from 91.14 yen. The euro rose to 124.19 yen from 123.92 yen. The U.S. currency fell after Federal Reserve Bank of San Francisco President Janet Yellen said the U.S. economy still needs low interest rates to gain strength. “When the day comes to start raising rates again, we have tools at the ready,” Yellen said in the text of a speech yesterday in San Diego. “For the time being, the economy still needs the support of extraordinarily low rates.” To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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