(RTTNews) - The dollar pulled back yet again versus the euro, unable to sustain its big gains from the previous session as traders shrugged off some troubling news from the housing front.

Even with stocks having a rare down day, risk appetite and fears about the long term impact of massive deficit spending weighed on the dollar against its euro area counterpart.

With one Federal Reserve official indicating today that that policy makers may hold off on interest rate hikes until 2012, the dollar is unlikely to generate sustained buying interest anytime soon.

The dollar dropped back to 1.4990 versus the euro, moving within a penny of its 15-month low of 1.5062.

Versus the sterling, the dollar manged to pare a fraction of its recent losses, edging to 1.6730 after hitting a 3-month low of 1.6877 earlier this week.

The buck also steadied versus the yen, staying above 89 after falling sharply over the past week. Yesterday, the dollar hit a monthly low of 88.72.

In economic news, US housing starts unexpectedly tumbled more than 10% to their lowest level in six months in October.

The drop came at a time when homebuilders where still facing the imminent expiration of the first-time homebuyers tax credit.
And despite decreasing interest rates, mortgage application volume fell across the board last week as purchase applications hit their lowest levels since November 1997.

In its weekly mortgage applications survey, the Mortgage Bankers Association reported that purchase applications fell 4.7 percent on a seasonally adjusted basis.

Consumer prices increased for the third consecutive month in October, partly due to a notable increase in energy and car prices.

Even with consumer prices rising from a month ago, consumers continued to pay less compared to a year ago, giving the Federal Reserve plenty of room to keep interest rates near zero without concerns about inflation.

Also today, St. Louis Federal Reserve President James Bullard said that the Federal Reserve may not raise interest rates from near zero levels until 2012.

"Policy rates are near zero in the U.S. and the rest of G-7 countries, something not seen in postwar economic history," he said. "The FOMC did not begin policy rate increases until 2 1/2 - 3 years after the end of each of the past two recessions."

Bullard will be a voting member of FOMC next year.

by RTT Staff Writer

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