Feb. 19 (Bloomberg) -- The dollar fell against 15 of the 16 most-active currencies on concern industry and government reports will show the housing recession in the U.S. is deepening.

The U.S. currency declined to a two-week low against the euro on speculation the Federal Reserve will keep cutting its benchmark interest rate from 3 percent. Australia's dollar rose to a three-month high after the nation's central bank said it considered a larger increase when raising borrowing costs to an 11-year high of 7 percent this month.

``We think there's a chance we'll break $1.48 against the euro on the expectation the U.S. will cut rates,'' said Chris Furness, head of currency strategy in London at 4Cast Ltd., a research company that counts central banks among its subscribers. ``We still have a problem. We don't know whether it's going to be recession or not.''

The dollar fell to $1.4742 per euro, the lowest since Feb. 5, and traded at $1.4726 as of 8:45 a.m. in London, from $1.4658 in New York yesterday. It weakened to 107.86 yen from 108.23 yen. The euro was at 158.90 yen, from 158.63.

Japan's currency also advanced against the dollar, or greenback, on speculation that China's central bank will raise borrowing costs and seek a stronger exchange rate to curb the fastest inflation in more than 11 years.

The U.S. currency fell 0.7 percent to 91.97 cents versus Australia's dollar, reaching the lowest since Nov. 9. The U.S. greenback also declined against the New Zealand dollar to 79.79 U.S. cents, near the lowest since July 26, from 79.52 yesterday.

Australian Dollar

The Australian dollar rose versus all 16 major currencies after central bank Assistant Governor Malcolm Edey said inflation may accelerate.

Minutes from the Reserve Bank of Australia's Feb. 5 meeting published today showed Governor Glenn Stevens and his colleagues discussed raising the benchmark rate by 50 basis points to cool the fastest inflation in almost two decades.

``The discussion about monetary policy in the minutes had a much sharper sting in the tail as far as the near-term rate outlook is concerned,'' wrote David de Garis, senior markets economist at National Australia Bank Ltd. in Sydney, in a note to clients. ``We still expect a 25 basis-point increase in March and a 40 percent chance of another.''

The yield advantage on Australian two-year bonds over similar-maturity U.S. Treasuries increased to 5.09 percentage points, the widest since December 1990.

The U.S. dollar dropped 5.1 percent versus the euro since the Federal Reserve started to cut interest rates on Sept. 18, the fourth-worst performer among the 16 most-active currencies.

`Sense of Vigilance'

``The markets have a heightened sense of vigilance before the U.S. housing data and are selling dollars,'' said Kenichiro Fujita, manager of derivatives-marketing in Tokyo at Aozora Bank Ltd., Japan's ninth-largest publicly traded lender by assets. ``The Fed will cut rates to 2 percent to support the economy and to avoid criticism that it always falls behind the curve.''

The U.S. National Association of Home Builders/Wells Fargo index of homebuilder sentiment may have held at 19 for a second month in February, one point above the record low reached in December, according to a survey of economists by Bloomberg News, before the data is released today. U.S. housing starts remained near a 16-year low in January, according to a separate Bloomberg survey before a Commerce Department report tomorrow.

``The dollar is probably going to weaken again in the near term,'' said Stephen Halmarick, co-head of economic and market analysis at Citigroup Inc. in Sydney, in an interview with Bloomberg Television. ``Overall, it does look like the U.S. housing market has a little bit of a way to go before you could say the worst is over.''

Commodity Currencies

Futures on the Chicago Board of Trade show a 26 percent probability that the Fed will lower its target for overnight lending between banks by 0.75 percentage point to 2.25 percent by March 18, compared with a 32 percent chance a week ago. The remaining odds are for a 50 basis-point cut.

The Australian dollar and the South African rand also rose as prices of raw materials the nations export increased.

The London Metal Exchange index, based on the cost of six metals including aluminum and copper, advanced 1.9 percent yesterday to the highest since October.

``A rise in commodities prices is pushing up the Australian dollar and the rand,'' said Norihiro Tsuruta, chief strategist of global investment research at Shinko Research Institute in Tokyo, a unit of Japan's second-largest-bank by assets. ``Behind this rise is that the markets are now correcting excessive pessimism about the world growth.''

Australia's currency may advance to 94 U.S. cents and 101 yen by the end of March, Tsuruta said.

PBOC Speculation

The yen gained on speculation the People's Bank of China will lift rates after the nation's inflation accelerated to the quickest pace in more than 11 years, said Hiroshi Yoshida, foreign-exchange trader in Tokyo at Shinkin Central Bank, Japan's fifth-largest publicly traded lender by assets

Japan's currency may advance to 107.50 a dollar today, Yoshida forecast.

The yuan rose 0.1 percent to 7.1540 per dollar and has climbed nearly 2 percent after rising 7 percent in 2007. Gains in the yuan support Asian currencies by reducing the competitiveness of Chinese exports and making the region's imports more affordable for consumers in the nation.

Economists are split on whether China will raise the one- year lending rate of 7.47 percent this year after six increases in 2007, a Bloomberg News survey showed last month.

Consumer prices rose 7.1 percent in January from a year earlier, the statistics bureau said today, after gaining 6.5 percent in December.

To contact the reporter on this story: Kosuke Goto in Tokyo at at kgoto2@bloomberg.net.

Last Updated: February 19, 2008 04:12 EST