By Catarina Saraiva Sept. 21 (Bloomberg) -- The dollar remained lower against most of its major counterparts before a Federal Reserve meeting where policy makers are expected to keep interest rates low and may set the stage for additional steps to boost the economy. The yen dropped against the euro on increased demand for higher-yielding assets as housing starts in the U.S. rose more than forecast in August, easing concern the recovery is faltering. The euro rallied versus the greenback to nearly a six-week high after investors bought the maximum amounts offered at Spanish and Irish debt sales, reducing concern the region’s sovereign debt crisis will worsen. The Australian dollar reached its highest level since July 2008. “If the Fed comes across less dovish, that can be seen as dollar-positive,” said Joe Manimbo, a market analyst in Washington at Travelex Global Business Payments, a currency- exchange network. “Today’s data might lessen the need for the Fed to do more to spur growth over the coming months.” The dollar fell 0.5 percent to 1.3132 per euro as of 10:03 a.m. in New York, after dropping as much as 0.7 percent earlier. The yen weakened 0.1 percent to 111.08 euro and strengthened to 85.35 against the dollar. Fed Moves The Fed will keep its benchmark rate in a range of 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. The Fed will prepare investors for additional purchases of securities to keep borrowing costs low, said Pacific Investment Management Co.’s Richard Clarida said. “The Fed’s rhetoric will get the markets ready for the real possibility of expanding their balance sheet at a later meeting this year,” Clarida, a Columbia University professor and global strategic adviser for Pimco, said in a radio interview yesterday on “Bloomberg Surveillance” with Tom Keene. U.S. builders broke ground on 598,000 homes at an annual rate, up 10.5 percent and the most since April, following a 541,000 pace in July, the Commerce Department said today in Washington. Housing starts were forecast to rise 0.7 percent to 550,000, according to the median estimate of 74 economists in a Bloomberg survey. “They were surprisingly good numbers,” said Fabian Eliasson, head of U.S. currency sales at Mizuho Financial Group Inc. in New York. “Dollar-yen had moved a little bit lower overnight, but has since gotten a boost. At the same time, it seems to be more risk-on.” European Debt Sales Ireland sold 1.5 billion euros ($1.97 billion) 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, the Bank of Spain said. Greece sold 390 million euros of 13-week Treasury bills at a yield of 3.98 percent, the Athens-based Public Debt Management Agency said. Demand for the auctions “helped to allay concern about the health of Europe’s banking sector,” said Travelex Global’s Manimbo. Reserve Bank of Australia policy makers signaled they may need to raise interest rates given t2he pace of the nation’s economic expansion. Australia’s currency rose 0.2 percent to 94.90 U.S. cents, from 94.72 cents yesterday. It touched 95.02 cents, the strongest level since July 2008. The yuan climbed to the highest level since 1993 after President Barack Obama criticized China for not letting it strengthen. It advanced before scheduled talks between Obama and Chinese Premier Wen Jiabao at this week’s United Nations General Assembly in New York. China Call 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 6.7061 per dollar, according to the China Foreign Exchange Trading System. The yen advanced against the dollar as concern that Japanese officials would resume selling 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 0.3 percent since then. To contact the reporter on this story: Catarina Saraiva in New York at asaraiva5@bloomberg.net

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