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Updated at 2:59 p.m., Tuesday, January 8, 2008

Dollar rises against yen, down versus euro

Associated Press

NEW YORK — The dollar gave up some of Monday's gains Tuesday amid rocky U.S. housing data and a plunging market, as traders looked ahead to European interest rate decisions later this week.

The dollar inched downward against the euro. The 15-nation currency was worth $1.4710 in late New York trading, up from $1.4696 Monday. The British pound also crept up to $1.9713 from $1.9697.

The National Association of Realtors monthly index, released Tuesday, showed pending U.S. home sales in November fell 2.6 percent, more than investors expected.

Tumbling shares of homebuilder KB Home and mortgage lender Countrywide Financial Corp. compounded Tuesday's housing shock on Wall Street, and the market plunged broadly late in the afternoon.

The dollar rose to 109.36 Japanese yen from 109.03 yen late Monday, but fell to 1.1145 Swiss francs from 1.1162 Swiss francs.

The European Central Bank and the Bank of England both meet on Thursday to set interest rates.

The ECB faces inflation estimated at 3.1 percent — well above its guideline of just under 2 percent — but also sliding business and consumer confidence in the euro zone.

Higher rates — used to combat inflation — also can strengthen a currency, and the near-record strength of the euro has raised concern among businesses and politicians about the competitiveness of European exports.

"Consensus is now suggesting that we'll see no change here either despite previous thoughts of a quick hike," said James Hughes, a market analyst at CMC Markets. "Any emerging inflationary pressures could, however, see opinion shift once again."

The pound has been hit by worries about the housing market, and was helped Tuesday by a report from a leading British lender, the Halifax, showing that house prices across the country rose by 1.3 percent in December.

As for the Bank of England's rate decision this week, "a quarter-point cut is far from certain, so any suggestion that house price inflation remains an issue even with the tighter credit market conditions could start to pressure the (bank) into leaving rates unchanged in the near term," Hughes said.

The U.S. Federal Reserve has cut rates three times over recent months as the subprime credit crisis has raised fears over the health of the economy.

Philadelphia Fed President Charles Plosser said in a speech Tuesday that rising price pressures present a difficult choice for monetary policy-makers as they contend with economic stresses.

More weakness in activity "may require further adjustments to policy," Plosser said, in a nod toward the possibility of further interest rate cuts.

In other New York trading, the dollar sloped down to 1.0022 Canadian dollars from 1.0061 Canadian dollars.