By Ron Harui Sept. 20 (Bloomberg) -- The dollar declined toward a five- week low against the euro before a report today that may show the U.S. housing market remains weak, adding to evidence the world’s largest economy is slowing. The U.S. currency weakened versus 12 of its 16 major counterparts on speculation the Federal Reserve’s Open Market Committee will say at a meeting tomorrow it’s considering further measures to keep borrowing costs low. Australia’s dollar climbed toward a two-year high against the greenback after central bank Governor Glenn Stevens said the biggest mining boom in a more than a century will stoke economic growth. “Apart from the focus on U.S. housing market data, the FOMC will see the market looking for signs that the Fed is inching closer to any further quantitative-easing measures, potentially putting the dollar at a disadvantage,” said Emmanuel Ng, a currency strategist at Oversea-Chinese Banking Corp. in Singapore. The dollar dropped to $1.3072 per euro as of 6:42 a.m. in London from $1.3050 in New York on Sept. 17, when it fell to $1.3159, the weakest level since Aug. 11. The U.S. currency slipped to 85.67 yen from 85.86 yen. The yen was little changed at 111.98 per euro from 112.06. Australia’s dollar rose 0.9 percent to 94.44 U.S. cents from last week, when it reached 94.69 cents, the strongest since July 2008. The National Association of Home Builders/Wells Fargo confidence index in the U.S. was at 14 this month, from 13 in August, according to a Bloomberg News survey. The reading has stayed below the 50 level, which means a majority of respondents said conditions were poor, since April 2006. Fed Meeting The Fed is likely to affirm at tomorrow’s meeting its pledge to keep interest rates low for an “extended period” and maintain the floor on its holdings of securities, according to economists surveyed by Bloomberg. “The bears are naturally hoping for U.S. housing data over the next two days to disappoint,” Philip Wee, a senior currency economist in Singapore at DBS Group Holdings Ltd., wrote today in a note to clients. “The skeptics are hoping for more quantitative-easing measures from the Fed.” The Dollar Index, which tracks the greenback against currencies from six major U.S. trading partners, dropped 0.1 percent to 81.290. The gauge has dropped for the past two weeks. Pimco’s El-Erian The Fed will also reduce its growth forecasts at this week’s meeting, said Mohamed A. El-Erian, chief executive at Pacific Investment Management Co., which runs the world’s biggest bond fund. The Fed “should and, I suspect, will,” cut its growth predictions, El-Erian, who is based in Newport Beach, California, wrote in an opinion piece published on Pimco’s website. The extra yield offered by 10-year Treasuries over similar- maturity Japanese government bonds has shrunk to 1.67 percentage points from this year’s high of 2.61 points on April 5. Australia’s dollar snapped a three-day loss as Stevens’ comments spurred traders to raise bets he will increase rates at the central bank’s next meeting. “The task ahead is likely to be one of managing a fairly robust upswing, ” the Reserve Bank of Australia governor said today at a forum. “Part of that task will, clearly, fall to monetary policy.” The RBA will tomorrow release the minutes of its Sept. 7 meeting, when it left its benchmark on hold for a fourth month and said it was appropriate “for the time being.” There is a 28 percent the central bank will raise rates at its Oct. 5 policy review, up from 19 percent odds at the end of last week, according to a Credit Suisse AG index. “The market is responding to the line that Governor Stevens thinks growth will increase to something above trend,” said Sue Trinh, a Hong Kong-based senior currency strategist at Royal Bank of Canada. “Aussie should remain underpinned at least till the end of the month. Investors who are looking to fade this rally can afford to be patient.” RBA Rate Odds The yen has risen 8.6 percent against the dollar this year as concern the global recovery is slowing boosted demand for Japan’s currency. The yen tends to strengthen in periods of economic turmoil as Japan’s trade surplus makes the nation less reliant on foreign capital. Japan’s government intervened to weaken the yen on Sept. 15 for the first time since 2004 after the currency rose to a 15- year high of 82.88 per dollar. The action spurred concern about the nation’s currency sales from international policy makers. “Japan, alone, cannot resolve the problem of the strong yen,” Bank of Korea Governor Kim Choong Soo said at a media seminar in Incheon, southeast of Seoul, Sept. 17. “Japan will need policy coordination with others, including the U.S. and China. The effect is limited when one country tries to handle the issue by market intervention.” Luxembourg Prime Minister Jean-Claude Juncker, who chairs meetings of euro-region finance ministers, said on Sept. 16 the group was “insisting” Japanese authorities “step back from unilateral interventions.” U.S. House Ways and Means Committee Chairman Sander Levin on Sept. 15 called Japan’s move “deeply disturbing.” To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net.

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