The dollar dropped to a 15-year low against the yen and the most versus the euro since July as a Federal Reserve regional survey showed the economy expanded in September at a “modest pace.”

The greenback slid against most of its major counterparts as traders speculated that the central bank will increase purchases of government debt to support the economy. The Australian and Canadian dollars and the Norwegian krone rallied as commodities gained.

“It’s a relatively soft report and reinforces the need for the Fed to increase stimulus in November,” said Kathy Lien, director of currency research at the online trader GFT Forex in New York. “It reinforces the theme in the market that’s driving the dollar lower.”

The dollar fell 0.6 percent to 81.07 yen at 2:30 p.m. in New York, from 81.58 yesterday, after declining to 80.85, the lowest level since April 1995. The dollar slid 1.7 percent to $1.3967 per euro, from $1.3727 yesterday, after falling 1.9 percent in the biggest intraday drop since July 1. The euro gained 1.1 percent to 113.24 yen, from 112 yen.

Sterling slid 0.8 percent to 88.07 pence per euro as Chancellor of the Exchequer George Osborne detailed the deepest budget cuts ever in Britain. The government is poised to eliminate 500,000 public-sector jobs and impose a levy on banks to extract the “maximum sustainable” revenue.

Minutes of the Bank of England’s last meeting showed policy makers voted 7-1-1 to keep the benchmark interest rate at 0.5 percent and the bond-purchase plan at 200 billion pounds ($315 billion).

Canada’s Loonie

Canada’s currency rose for the first time in five days, adding 1.1 percent to C$1.0219 per U.S. dollar as a gain in stocks and raw materials indicated demand for assets related to economic growth. The loonie has dropped 2.5 percent since trading stronger than parity with the greenback on Oct. 14 for the first time since April.

U.S. stocks rose, pushing the Standard & Poor’s 500 Index up 1.3 percent. Crude oil for November delivery increased 3 percent to $81.90 a barrel.

The Australian dollar appreciated as traders used its drop to the lowest level in two weeks to buy the currency on speculation the nation’s central bank will raise interest rates.

The Aussie gained 1.9 percent to 98.74 U.S. cents, from 96.86 cents yesterday, when it touched 96.62 cents, the least since Oct. 5. It reached parity with the greenback on Oct. 15 for the first time since exchange controls were removed in 1983.

Stronger Real

The real rose for the first time in five days, advancing 0.5 percent to 1.6744 per dollar. Brazil’s central bank will keep its benchmark overnight rate unchanged at 10.75 percent today, according to all 51 analysts in a Bloomberg News survey.

Brazil stepped up on Oct. 18 efforts to curb gains in the real by announcing an increase in inflow taxes, saying it may be forced to take additional measures as Finance Minister Guido Mantega called for an end to the worldwide “currency war.”

The euro was supported versus the dollar as Germany’s Chancellor Angela Merkel said in Berlin that governments must find an “exit strategy” from stimulus spending as the global financial crisis recedes.

The Dollar Index, which IntercontinentalExchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners including the euro, yen, pound and Canadian dollar, dropped 1.3 percent to 77.174.

The gauge of the greenback has fallen 10 percent since the end of June on speculation the Fed will debase the currency by increasing asset purchases to support the economy in a practice known as quantitative easing.

Plosser on Dollar

Concerns that inflation will accelerate and the U.S. economy will weaken are among the reasons for declines in the dollar, said Charles Plosser, president of the Philadelphia Fed.

Investors are “worried about inflation,” Plosser said in response to questions after a speech today in Philadelphia. “If inflation in the United States picks up as some policy makers have suggested it should, that would send the dollar down. It becomes weaker.”

The dollar extended its drop earlier today on speculation a report by Medley Global Advisors, a consulting firm used by hedge funds, said the central bank will buy back more assets than expected.

“There’s a report out that suggests that we might see far greater quantitative easing,” said John McCarthy, director of currency trading at ING Groep NV in New York. “That in essence caused the dollar to sell off.”