FOREX-Dollar falls on record drop in NY Fed index

The dollar fell against most major currencies on Friday after the New York Federal Reserve's February manufacturing index posted its largest monthly decline on record, adding to fears about a slowing U.S. economy.

"The NY Fed manufacturing survey is yet another indication that U.S. growth may be slowing much more than expected," said Brian Dolan, chief FX strategist at Forex.com in Bedminster, New Jersey. "Stock futures took a dive on the news and that means yen crosses are under pressure as well."

Indeed, the plunge in the "Empire State" general business conditions index hit the dollar particularly hard against the low-yielding yen and Swiss franc, which do well when investors shy away from risk.

The dollar fell 0.6 percent to 107.27 yen after the report before easing to 107.42 yen. It slipped to 1.0898 Swiss francs , down 0.7 percent from late Thursday. The euro also fell 0.5 percent to 157.71 yen .

The euro was 0.3 percent firmer at $1.4681 , helped by tough talk from European Central Bank officials who reiterated that inflation is a bigger euro-zone concern than growth.

That contrasts sharply with Fed officials who say U.S. growth will remain sluggish in the near term, validating market expectations of yet more interest rate cuts.

The Fed has cut U.S. benchmark rates from 5.25 percent to 3 percent since September, and markets are pricing in another half percentage point cut at its next policy meeting in March.