The dollar fell to the lowest in almost two months against the euro amid signs the U.S. economic recovery will remain sluggish and speculation European officials are addressing the region’s debt crisis. The U.S. currency weakened against 13 of its 16 most-traded counterparts as housing starts declined to the lowest level since October 2009 and before data tomorrow that may show continuing jobless claims increased. The yuan reached a 17-year high as Chinese President Hu Jintao meets with President Barack Obama at the White House. “The housing starts number was negative for the dollar,” said Jessica Hoversen, a Chicago-based analyst at the futures broker MF Global Holdings Ltd. “The two large headwinds to an ongoing recession are the housing market and the employment situation.” The dollar dropped 0.9 percent to $1.3510 per euro at 9:32 a.m. in New York, the weakest since Nov. 23, from $1.3387 yesterday. The U.S. currency declined 0.5 percent to 82.14 yen, from 82.56. IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners, dropped 0.7 percent to 78.429, the lowest since Nov. 22. Housing Slows Housing starts declined 4.3 percent to a 529,000 annual rate last month, according to a Commerce Department report. Economists in a Bloomberg survey had estimated a 0.9 percent drop to a 550,000 annual pace. The number of people continuing to receive jobless benefits rose to 3.99 million in the week ended Jan. 8 from 3.88 million the previous week, another survey showed before the data tomorrow. EU Economic and Monetary Commissioner Olli Rehn said yesterday that officials need to strengthen the region’s 750- billion euro ($1.01 trillion) rescue mechanism to help restore investor confidence. “It’s important that we realize we still have continued crisis in the sovereign debt markets,” Rehn said. “We can’t afford any kind of self complacency in this respect.” Portugal’s borrowing costs fell and demand rose at the sale of 750 million euros of 12-month bills, adding to other auctions this week that signal Europe’s high-deficit countries can still finance their debt. Today’s sale came one day after Spain and Greece sold more than 6 billion euros of treasury bills. ‘Room to Rally’ “As concerns over the European sovereign debt crisis have eased somewhat, that has allowed the euro room to rally,” said Michael Woolfolk, senior currency strategist in New York at Bank of New York Mellon Corp., the world’s largest custodial bank, with more than $20 trillion in assets under administration. The yuan strengthened 0.1 percent to 6.5831 per dollar after reaching 6.5815, the strongest level since China unified official and market exchange rates at the end of 1993. U.S. Treasury Secretary Timothy F. Geithner said China should understand that the currency’s level is a “big issue.” Speaking in a radio interview broadcast yesterday, Geithner said a stronger yuan is in China’s interest and a rising currency would help the nation manage inflation. China Talks “The U.S. is expected to keep pushing China to strengthen its currency,” said Toshiya Yamauchi, a senior currency analyst in Tokyo at Ueda Harlow Ltd., which provides foreign-exchange margin-trading services. “It will likely weaken the dollar.” Germany’s Finance Ministry said it was not looking into a “restructuring” of Greek debt, denying a report in Die Zeit newspaper that the German government is considering a potential buyback of Greek bonds. “We’re not working on a restructuring of Greek debt,” Finance Ministry spokesman Bertrand Benoit said in an e-mailed statement. Die Zeit had earlier reported that Greece would be allowed to buy back government bonds with funds from the European Financial Stability Facility made available “with favorable interest conditions.” To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

Source