Dollar Falls on Concern Credit Crisis Will Hurt Economic Growth

Oct. 17 (Bloomberg) -- The dollar fell against the euro, headed for its first weekly decline this month, before U.S. reports that will probably show a deepening housing slowdown eroded consumer confidence.

The U.S. currency also fell against the British pound and the Swiss franc on prospects the credit crisis will hurt growth in the world's largest economy, prompting traders to add to bets on a Federal Reserve interest-rate reduction.

``The reports may reinforce worries that the U.S. is in a recession and concerns linger over its financial markets,'' said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan's largest currency broker. ``The dollar is still a sell.''

The dollar dropped to $1.3501 per euro at 9:35 a.m. in Tokyo from $1.3456 late in New York yesterday and from $1.3408 on Oct. 10. It traded at 101.60 yen from 101.57 yen yesterday and 100.67 a week ago. Against the euro, the yen was at 137.14 from 136.73.

The U.S. currency weakened to 1.1334 versus the Swiss franc from 1.1379 and declined to $1.7348 against the British pound from $1.7304.

The dollar headed for weekly losses against 9 of the 16 most-active currencies as U.S. housing starts declined to an annual rate of 870,000 homes in September, the fewest since January 1991, from 895,000 in August, according to a Bloomberg News survey of economists. The Commerce Department will issue the report at 8:30 a.m. in Washington.

Investors `Worried'

The Reuters/University of Michigan preliminary index of consumer sentiment, due at 10 a.m., likely decreased to 65.0 in October from 70.3 in September, a separate survey showed.

Futures traded on the Chicago Board of Trade show a 46 percent chance the Fed will lower its 1.5 percent target rate for overnight bank loans by a half-percentage point to 1 percent at its Oct. 29 meeting. Traders saw no chance of a cut of that magnitude a week ago. The odds of a quarter-point cut are 54 percent.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net

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