Dollar falls broadly as US housing starts plunge

NEW YORK (Reuters) - The dollar fell broadly on Wednesday after a report showed U.S. housing starts dropped to their lowest level in 14 years in September, adding to concerns that the housing market may drag on the U.S. economy.

Traders sold dollars after the Commerce Department said home construction starts fell 10.2 percent last month to below Wall Street's consensus forecast. For details, see.

A weaker housing market and a slow U.S. economy may prompt Federal Reserve policy-makers to cut benchmark interest rates again from the current 4.75 percent. Fed officials next meet on October 30-31.

"The U.S. housing market is going to continue to be a significant drag on the overall U.S. economy, and the U.S. dollar is going to weaken as a result," said Firas Askari, head currency trader at BMO Capital Markets in Toronto.

"The Federal Reserve is more likely to be easing rates, maybe not on October 31, but definitely within the next three to six months," he added.

In late morning trading in New York, the euro was 0.4 percent higher at $1.4215. The dollar index, which measures the value of the greenback against a basket of six currencies, fell 0.35 percent to 78.057.

Against the yen, the U.S. currency reversed earlier gains and fell 0.1 percent to 116.68.

According to another government report, U.S. consumer prices rose at the sharpest rate in four months in September. But core prices, which exclude volatile food and energy costs, rose in line with expectations.

"CPI came in about as expected, so there's more focus on the big drop in housing starts," said Shaun Osborne, a senior currency strategist at TD Securities in Toronto. "The general trend is toward risk-taking again today after the rebound in Asian equities."

The Federal Reserve's "beige book," a snapshot of conditions in the U.S. economy, may provide further clues on the Fed's next move on rates when it is released at 2 p.m.