By Lukanyo Mnyanda and Candice Zachariahs Sept. 21 (Bloomberg) -- The dollar fell for a second day against the euro and the yen before reports this week that may show the U.S. housing market remains fragile, adding to signs that growth in the world’s largest economy is slowing. The euro rose against 15 of its 16 most-actively traded peers after investors snapped up the maximum amount at Spanish and Irish debt sales today. The U.S. currency was near a six- week low versus the euro on bets the Federal Reserve will today affirm its pledge to keep interest rates at a record low for an “extended period.” The pound fell against the euro as the U.K. posted a bigger budget deficit last month than economists predicted. “We have the FOMC tonight and the dollar has to stay in a nervous range,” said Toshi Honda, a strategist at Mizuho Corporate Bank Ltd. in London. “The auctions are going well. That’s supporting the euro.” The dollar declined to $1.3134 per euro as of 10:20 a.m. in London from $1.3061 in New York yesterday, after falling to $1.3159 on Sept. 17, the weakest since Aug. 11. The U.S. currency traded at 85.54 yen from 85.69. The yen was at 112.35 per euro from 111.93. The Federal Housing Finance Agency’ monthly index for U.S. house prices fell 0.2 percent in July, following a 0.3 percent decline in June, according to a Bloomberg survey before tomorrow’s report. A Commerce Department report today will show growth in housing starts slowed to 0.7 percent in August from 1.7 percent the month before, a separate survey showed. Fed Meeting The Fed will keep its benchmark rate at between zero and 0.25 percent at today’s meeting, where it has been since December 2008, a Bloomberg News survey showed. Fifty-four of 63 economists surveyed said the central bank will leave unchanged a sentence saying high unemployment and low inflation warrant “exceptionally low” rates. “It’s an ugly parade and the least ugly currency at the moment is the euro,” said Robert Rennie, head of currency research in Sydney at Westpac Banking Corp., Australia’s second- largest lender. Ireland sold 1.5 billion euros in a bond auction, the National Treasury Management Agency said today. Spain sold 7 billion euros of 12-month and 18-month bills, the maximum target, at an auction today, the Bank of Spain said. ‘Good News’ “The auction results were good news for the market,” said Orlando Green, an interest-rate strategist at Credit Agricole Corporate & Investment Bank in London. The yuan climbed to the highest level since 1993 after President Barack Obama criticized China for not letting it strengthen. It advanced for a ninth day against the dollar, its longest winning streak since Aug. 9, before scheduled talks between Obama and Chinese Premier Wen Jiabao at this week’s United Nations General Assembly in New York. China’s leaders haven’t done “everything they said would be done” to allow appreciation, Obama said yesterday at an hour-long town hall discussion in Washington. “The yuan’s quicker appreciation is related to the political game between China and the U.S. on the currency policy,” said Isaac Meng, a Beijing-based economist at BNP Paribas. “It’s also related to the dollar’s broad weakness because the yuan is managed against a basket of currencies.” The yuan gained 0.1 percent to 6.7058 per dollar, according to the China Foreign Exchange Trading System. Pound Falls Britain’s currency declined 0.7 percent to 84.57 pence against the euro. It was 0.1 percent weaker at $1.5537. The U.K.’s net borrowing was 15.3 billion pounds ($23.7 billion), compared with 13.5 billion pounds a year earlier, the Office for National Statistics said in London today. The median of 15 forecasts in a Bloomberg News survey was a shortfall of 12.5 billion pounds. It was the largest deficit for any August since records began in 1993. The yen advanced against its major counterparts as concern that Japanese officials would resume steps to weaken it eased. The Bank of Japan doesn’t appear to be “trying to push the yen an awful lot higher, they’ve had a fair a bit of criticism already,” said Paul Bednarczyk, a strategist in London at 4Cast Ltd., a research company that counts central banks among its subscribers. “It’s very hard for the Americans to lay into China” while Japan is weakening its currency, he said. Japan intervened in foreign exchange markets on Sept. 15 for the first time since 2004 to protect its exporters after the yen rose to a 15-year high against the dollar. While that helped the currency slump 3.3 percent on the day, it has climbed 0.5 percent since then. To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Candice Zachariahs in Sydney at czachariahs2@bloomberg.net

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