The dollar declined to the weakest level in more than a month versus the euro as a report released before the Federal Reserve’s statement showed consumer prices rose in February, reducing safety demand. The yen fell to the weakest level against the euro this year as the Bank of Japan said it will step up purchases of government bonds from banks, spurring concern it will flood the market with currency. The pound dropped to a seven-week low against the euro as unemployment in the U.K. rose in February at the fastest pace since at least 1971. “The fact that inflation holds up like this suggests the deflationary spiral is not running out of the control,” said David Watt, a senior currency strategist in Toronto at RBC Capital Markets, a unit of Canada’s biggest bank by assets. “Now some people are eyeing a recovery. That might hurt the dollar.” The dollar lost 0.8 percent to $1.3127 per euro at 9:02 a.m. in New York, from $1.3017 yesterday. It reached $1.3144, the weakest level since Jan. 29. The yen slid for a fifth day against the euro, declining 0.6 percent to 129.08, from 128.35 yesterday. It reached 128.83, the weakest level since Dec. 29. The yen traded at 98.32 per dollar, compared with 98.60.

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