By Stanley White
Sept. 24 (Bloomberg) -- The dollar fell against the euro as the U.S. Congress studies the government's $700 billion rescue proposal, with Federal Reserve Chairman Ben S. Bernanke saying a delay in passing the plan will hurt economic growth.
The U.S. currency also approached a one-month low versus the British pound before an industry report that economists estimate will show U.S. home sales dropped, bolstering the case for a Fed interest-rate cut. The Australian and New Zealand dollars weakened as prices for commodities the countries export declined.
``The dollar will face a lot of pressure to go lower,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``Uncertainty about when the U.S. rescue package will pass and how much of a burden it will place on future generations is damaging confidence in the dollar.''
The currency dropped to $1.4673 per euro at 10:21 a.m. in Tokyo from $1.4648 late yesterday in New York. It was at 105.49 yen from 105.56 yen. Against the pound, the dollar traded at $1.8547 from $1.8522. It reached a one-month low of $1.8642 on Sept. 22. The euro bought 154.74 yen from 154.63 yen. The dollar may decline to $1.4710 per euro today, Soma forecast.
The Australian dollar fell to 83.31 U.S. cents from 84.40 cents late in Asia yesterday. New Zealand's dollar weakened 1.3 percent to 68.09 U.S. cents.
Government Plan
U.S. lawmakers have balked at rubber-stamping the Treasury's plan to remove illiquid assets from the banking system, with Democrats demanding it include support for homeowners and limits on executive pay and Republicans resisting the plan's reach and size.
Treasury Secretary Henry Paulson and Bernanke appeared before the Senate Banking Committee. Under the plan, the government would buy devalued securities from financial institutions that economists estimate would drive government debt above 70 percent of gross domestic product and push the annual budget gap to an all-time high next year.
``The sooner we get a plan in place -- we can worry about the details later -- the sooner we can reduce uncertainty,'' said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon, the world's largest custodial bank, with more than $23 trillion in assets under administration.
European Contraction
Gains in the euro may be limited by speculation weakening German business confidence will add to evidence that growth is slowing in the 15 countries that share the currency.
The Ifo institute's business climate index declined to 94.3 in September from 94.8 in August, according to the median of 41 forecasts in a Bloomberg News survey. That would be the weakest reading since June 2005. Ifo will release the report, based on a survey of 7,000 executives, at 10 a.m. in Munich today.
``Economic data in Europe reminds people there's more weakness coming,'' said Brian Kim, a currency strategist at UBS AG in Stamford, Connecticut. ``It's going to provide longer-term support for the dollar, but right now all focus is on the bailout plan.''
The U.S. currency has lost almost 6 percent versus the euro since touching a one-year high of $1.3882 on Sept. 11. The dollar reached $1.6038 on July 15, the weakest level since the European currency made its 1999 debut.
The U.S. National Association of Realtors will say today that house purchases declined to a 4.94 million annual pace from 5 million in July, according to a Bloomberg survey. Sales reached a 4.85 million pace in June, the fewest since comparable records began in 1999.
New-Home Sales
The Commerce Department is forecast to report that sales of new houses dropped to an annual pace of 510,000 from 515,000 in July, according to a separate survey before tomorrow's data. Sales of existing and new homes are down 35 percent from their July 2005 peak.
``A large amount of wealth has truly been lost, and these are losses that have not been offset by gains,'' Robert Merton, the Nobel Prize-winning economist and co-founder of Long-Term Capital Management, said yesterday during a panel discussion at Harvard Business School in Boston. ``Like it or not, those losses have to be borne by house-owners, by those who financed them and by the general population.''
To contact the reporters on this story: Stanley White in Tokyo at swhite28@bloomberg.net
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