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Dollar falls as weak US economic data weighs

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The dollar weakened on Tuesday as poor US economic data reinforced the view that the Federal Reserve will remain cautious about raising interest rates.

[NEW YORK] The dollar weakened on Tuesday as poor US economic data reinforced the view that the Federal Reserve will remain cautious about raising interest rates.

The yen also slid, amid expectations for fresh measures by the Bank of Japan following two deadly earthquakes in southern Japan at the end of last week.

The dollar tumbled after data showed new US home construction slumped in March to the lowest pace since October.

"The economy looks like it could benefit from low rates for longer after data today showed US housing starts fell by a larger-than-expected 8.8 per cent in March," said Joe Manimbo, senior market analyst at Western Union Business Solutions.

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A buoyant German investor confidence report from the ZEW economic institute showed confidence in Europe's largest economy rising for a second straight month in April.

The shared European currency rose 0.4 per cent to US$1.1359 per euro.

The euro "is doing a little bit better as the ZEW reading was the best for the whole year," said Boris Schlossberg of BK Asset Management.

The yen showed more weakness than the greenback, slipping to 109.20 yen per dollar in a post-earthquake swoon.

"We now have concerns that the economic impact from the Kumamoto earthquake could become larger, which is leading to expectations of further easing from the Bank of Japan," Toshihiko Matsuno, chief strategist at SMBC Friend Securities, told Bloomberg News.

Traders were looking ahead to Wednesday's US existing-home sales report for March. Analysts expected an increase in sales from February that could shore up confidence in the housing market as it enters the crucial spring selling season.

AFP

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