July 17 (Bloomberg) -- The dollar may fall against the euro before a report forecast by economists to show U.S. housing starts fell in June to the lowest level since 1991.

Federal Reserve Chairman Ben S. Bernanke told a congressional committee yesterday that growth and inflation risks are increasing and that the housing market is the ``central element'' of the crisis. U.S. investors turned bearish on the dollar for the first time in three months, a survey of Bloomberg customers showed.

``The market is very jittery,'' said Adrian Schmidt, a senior foreign-exchange strategist in London at Royal Bank of Scotland Group Plc, in an interview on Bloomberg Television. ``It's nervous about the U.S. financial sector and worried about a further slowdown.'' He expects the dollar to weaken to a record low.

The dollar traded at $1.5827 per euro at 6:13 a.m. in Tokyo, after increasing 0.5 percent yesterday. It touched the all-time low of $1.6038 on July 15. The dollar was at 105.07 yen, following a 0.4 percent advance. The euro traded at 166.29 yen, after decreasing 0.2 percent.

Housing starts fell to 960,000 in June, from 975,000 the prior month, according to the median forecast of 76 economists surveyed by Bloomberg News. The Department of Commerce report is due at 8:30 a.m. New York time. Global banks and securities firms have reported losses and writedowns of more than $400 billion related to subprime mortgages.

`Pressure Remains'

``It's clear that we're not out of the woods in terms of the credit crisis,'' said Todd Elmer, currency strategist at Citigroup Global Markets in New York. ``The pressure remains on the dollar.''

The dollar will weaken against the euro, yen, Brazilian real and Swiss franc in the next six months as confidence in Fed and Treasury efforts to keep the economy out of a recession fades, according to respondents in the monthly Bloomberg Professional Global Confidence Index, which questioned 5,450 customers from Los Angeles to Paris to Tokyo.

The bearish outlook is consistent with expectations of futures traders, who are placing less of a chance that the U.S. central bank will raise borrowing costs this year.

Fed funds futures on the Chicago Board of Trade show a 10 percent chance the central bank will increase its 2 percent target lending rate by a quarter-percentage point at its Aug. 5 meeting, compared with 83 percent odds a month ago.

Anything that can be done to strengthen the housing market ``would be beneficial,'' Bernanke told the House Financial Services Committee in Washington yesterday.

Fed Minutes

Some Fed policy makers said at the June 24-25 rate-setting meeting that an increase in the target lending rate ``would be appropriate very soon,'' minutes released yesterday showed. Kansas City Fed President Thomas Hoenig said in the text of a speech in Durango, Colorado, that policy makers are walking a ``fine line'' between supporting growth and curbing inflation.

The dollar and U.S. stocks gained yesterday as the price of oil fell and Wells Fargo & Co., which has avoided the worst of the fallout from the subprime mortgage market's collapse, topped analysts' profit estimates. The Standard & Poor's 500 Index rose for the first time in four days, increasing 2.3 percent. Crude oil for August delivery dropped 3.1 percent to $134.45 a barrel.

The Dollar Index on the ICE market increased yesterday for the first time in six days, rising 0.1 percent to 71.965. It touched 71.508, the lowest level since April.

`No Bias'

The U.S. currency has given up gains made versus the euro since July 3, when European Central Bank President Jean-ClaudeTrichet said he had ``no bias'' on future interest-rate moves after increasing the main refinancing rate to 4.25 percent.

The dollar strengthened 0.6 percent to $1.5706 per euro that week. It has since slumped 0.8 percent on concern losses will deepen at Fannie Mae and Freddie Mac, the two largest buyers of U.S. mortgages.

``The bad news in the U.S. is very much priced in already,'' said Adam Fazio, a currency strategist at CIBC World Markets Inc. in New York. ``The market is becoming punch-drunk to negative news out of the U.S. while the bad news out of Europe is just starting to come out. The euro is at such lofty levels.''

German investor and analyst confidence declined this month to the lowest level since data began in 1991, the ZEW Center for European Economic Research in Mannheim said this week.

To contact the reporter on this story: Bo Nielsen in New York at bnielsen4@bloomberg.net

Last Updated: July 16, 2008 17:18 EDT