FRANKFURT, Germany – The dollar fell against the euro Wednesday on traders' expectations that the European Central Bank will lift its benchmark interest rate for the first time since last summer. Such a move would make the already-strong euro more desirable to investors.

The 15-nation currency bought $1.5870 in afternoon European trading, up from the $1.5793 it bought in New York late Tuesday.

The British pound bought $1.9918, down slightly from $1.9944 the night before. Meanwhile, the dollar bought 106.06 Japanese yen, edging slightly above the 106.01 it bought in New York Tuesday night.

The market also expects the dollar to slide lower later in the week, as the ECB holds its rate-decision meeting Thursday. Many economists believe the ECB is likely to raise its main interest rate to 4.25 percent from 4 percent amid high euro zone inflation, but then hold the rate steady.

Higher euro zone rates tend to send its currency higher against the dollar as investors park money where it earns more interest. But higher interest rates can slow economic growth as money becomes more expensive to borrow. ECB president Jean-Claude Trichet appears to have targeted inflation as the bigger threat.

“The big level is $1.6020 – the all-time highs on the euro to U.S. dollar,” said currency analyst James Hughes at CMC Markets in London.

“Although we're around 200 points shy of that just now, the levels of volatility we're seeing certainly don't rule out a move back up here.”