Dollar Trades Near 2-Week Low Versus Euro Before U.S. Reports

By Kosuke Goto and Stanley White

The dollar traded near a two-week low against the euro on speculation U.S. reports tomorrow will show falling house prices are eroding confidence among consumers.

The U.S. currency approached a one-week low versus the yen as traders raised bets that the Federal Reserve will delay increasing interest rates to prevent further credit-market writedowns. The British pound fell against the euro after an industry report showed U.K. house prices declined by the most this year in June.

``Weaker data will push down the dollar further, raising concern about the spread of credit losses,'' said Yuji Saito, head of foreign-exchange sales in Tokyo at Societe Generale SA, France's second-largest bank by market value. ``Weak indicators make the Fed's job far more difficult amid inflation worries.''

The dollar traded at $1.5602 against the euro at 12:02 p.m. in Tokyo near the lowest level since June 10, compared with $1.5606 in New York on June 20. The dollar bought 107.34 yen, close to the weakest level since June 12, from 107.33 late last week. The euro traded at 167.45 yen from 167.54 yen.

The U.S. currency may move between $1.5550 and $1.5670 a euro, and 106.80 yen and 107.80 yen today, Saito forecast.

The British pound slipped to 79.05 pence per euro from 78.98 pence on June 20, and to $1.9751 against the dollar from $1.9761, after Rightmove Plc said the average asking price for a U.K. home dropped 1.2 percent from May as buyers shunned the market, deepening Britain's property slump.

Yuan, Won

China's yuan rose to 6.8680 per dollar, the strongest since a dollar link was scrapped in 2005, from 6.8801, as the central bank seeks tougher policies to combat inflation. The South Korean won, the second-worst performer this year of the 10 most- active currencies in Asia outside Japan, fell for a second day to 1,031.55 per dollar on speculation overseas investors will sell the currency as they reduce holdings of the nation's assets.

The Australian and New Zealand dollars rose as the price of commodities that the nations export increased, supporting the outlook for the two economies. Australia's currency advanced to 95.48 U.S. cents from 95.33 cents on June 20. The New Zealand dollar rose to 76.27 U.S. cents from 76.11 cents.

The U.S. currency has risen 1.1 percent against the euro and 7.6 percent versus the yen this quarter, as Fed Chairman Ben S. Bernanke said earlier this month economic risks had faded, prompting investors to bet the central bank will raise interest rates later this year after seven decreases since September.

Housing, Confidence

A S&P/Case-Shiller report tomorrow will show home prices in 20 U.S. metropolitan areas dropped 15.9 percent in April from a year earlier, the most since records were first published in 2001, a Bloomberg News survey of economists shows. The Conference Board consumer confidence index probably fell to 56.4 in June, the lowest since October 1992, from 57.2 in May, according to a separate survey.

Futures on the Chicago Board of Trade showed a 10 percent chance the Fed will raise its 2 percent target rate for overnight lending between banks by a quarter-percentage point on June 25, compared with 22 percent odds a week ago.

The dollar may fall to 105.72 yen, based on charts traders use to predict price movements, according to Tomoko Fujii, head of economics and strategy for Japan at Bank of America Corp.

The currency stayed below its 200-day moving average for a second day on June 20, signaling further losses, said Tokyo- based Fujii. The dollar may now fall to the next level of so- called support around 105.72 yen, where it will meet a trend- line connecting a low of 95.76 yen on March 17 and a low of 102.74 on May 22, she said.

Futures Bets

Futures traders decreased their bets that the yen will gain against the dollar, figures from the Washington-based Commodity Futures Trading Commission showed on June 20.

The difference in the number of wagers by hedge funds and other large speculators on an advance in the yen compared with those on a drop -- so-called net longs -- was 5,857 on June 17, the least since Jan. 4, compared with net longs of 7,716 a week earlier. The number is sometimes seen as a contrary indicator.

The yen was little changed after Japanese manufacturers said they are pessimistic on surging commodity costs and the risk of a U.S. recession, according to a survey by the Cabinet Office and Finance Ministry released today.

Gains in the euro may be limited by speculation an industry report today will show German business confidence fell in June as record oil prices and the prospect of higher interest rates dimmed the outlook for growth in Europe's largest economy.

The Ifo institute will say its business climate index declined to 102.5 from 103.5 in May, according to the median of 42 forecasts in a Bloomberg News survey. Ifo will release the report, based on a survey of 7,000 executives, in Munich today.

``Should data due today prove to be weaker ones, that will highly likely lead to a decline in the euro on dwindling expectations of the ECB's rate hikes,'' Tohru Sasaki and Junya Tanase, currency strategists in Tokyo at JPMorgan Chase & Co., wrote in a research note today.

To contact the reporters on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net;