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NEW YORK, Dec 31 (Reuters) - The dollar rose against the euro but fell against the yen in the final trading day of 2007 on Monday, though dealers resisted making big bets until volume increases after New Year's Day.
The dollar was on track for its biggest annual decline in four years against a basket of major currencies on expectations the Federal Reserve will have to lower interest rates further to stave off a recession. The Fed already has cut its benchmark federal funds rate by a full percentage point in three moves starting at its September meeting in an effort to ease a credit crunch which began in August.
It was the second straight year of declines for the dollar index.
"It's a funny market right now and I can't point to any fundamental factor for what we are seeing," said Stephen Malyon, currency strategist at Scotia Capital in Toronto. "We are in holiday trading mode until Wednesday."
The New York Board of Trade's U.S. dollar index, a gauge of the dollar's performance against a basket of six major currencies, rose 0.8 percent on the day to 76.713 .DXY.
It is down around 8.4 percent for all of 2007 -- on track for its biggest annual fall since 2003 -- though the index is off record lows touched in November.
The euro traded 0.9 percent lower from late Friday to $1.4577, <EUR=>, after falling as low as 1.4570, according to Reuters data.
Against the yen, the dollar fell 0.6 percent to 111.83 yen <JPY=>. (Reporting by Nick Olivari; Editing by Andrea Ricci)