The dollar declined against the euro on speculation reports on U.S.
home sales and durable-goods orders will encourage the Federal Reserve
to delay raising interest rates.
The currency also weakened versus the yen for the first day in four
after U.S. Treasury Secretary Henry Paulson told CBS News yesterday the
economy is in a ``challenging time'' and probably will have slow growth
for months because of higher oil prices. The pound fell after a private
industry report showed U.K. house prices dropped the most since at
least 2002.
``There are still grave concerns about the slowing U.S. economy,'' said
Masashi Kurabe, head of currency sales and trading at Bank of
Tokyo-Mitsubishi UFJ Ltd. in Hong Kong, a unit of Japan's largest
publicly traded lender by assets. ``I can't be wild with joy over the
dollar yet.''
The pound slid for a second day as a Rightmove Plc report showed U.K.
house prices fell 2 percent in July from a year earlier, the first
annual drop since Britain's most-used property Web site started
measuring them in 2002.
Bank of England policy maker David Blanchflower said in an interview
with the Guardian newspaper that the U.K. economy is entering a
recession that may last more than a year and the central bank must
lower interest rates to support the economy.
``Blanchflower said there may be three to four quarters of contraction,
and the housing data were weak,'' said Lee Wai Tuck, a currency
strategist at Forecast Pte Ltd. in Singapore. ``We'll likely see
downward pressure on the pound.''
Sales of previously owned homes in the U.S. declined to a 4.93 million
annual pace in June, from 4.99 million in May, as the housing slump
headed for a third year, according to the median estimate of economists
surveyed.
The National Association of Realtors will release the report on July
24. A day later, the Commerce Department will say sales of new houses
dropped to an annual pace of 503,000 from 512,000 in May, a separate
survey shows. Sales of existing and new homes are down 35 percent from
their July 2005 peak.
Losses in the dollar may be limited after U.S. central bank policy
maker Gary Stern said the Fed shouldn't wait for housing and financial
markets to stabilize before raising rates.
``We're pretty well-positioned for the downside risks we might
encounter from here,'' Stern, president of the Federal Reserve Bank of
Minneapolis, said in an interview on July 18. ``I worry a little bit
more about the prospects for inflation.''