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The dollar fell for a second day versus the euro on speculation the U.S. housing market will remain fragile, adding to signs the world’s largest economy will take time to recover.

Australia’s dollar was near the highest in two years as its central bank said higher interest rates may be needed to cope with the nation’s economic growth. Malaysia’s ringgit traded near a 13-year high versus the greenback as investors sought higher-yielding assets with the Federal Reserve predicted to maintain its near-zero target rate.

“There are lingering worries over the sustainability of the U.S. recovery,” said Masanobu Ishikawa, general manager of for eign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “This may be a dollar-selling factor.”

The dollar fell to $1.3092 per euro as of 12:16 p.m. in Tokyo from $1.3061 in New York yesterday. It fell to as low as $1.3159 on Sept. 17, the weakest level since Aug. 11. The U.S. currency traded at 85.54 yen from 85.69 yesterday. The yen traded at 112 per euro from 111.93.

A report due today from the Commerce Department will show housing starts were at a 550,000 annual rate in August from 546,000 a month earlier, according to the median forecast in a Bloomberg News survey of economists. Construction permits were little changed at a 560,000 pace, a separate survey showed.

The Federal Housing Finance Agency’ seasonally adjusted monthly index for U.S. house prices was down 0.2 percent in July, following a 0.3 percent decline in June, according to a survey of economists before tomorrow’s report.

Aussie Record
Australia’s currency was near its strongest since July 2008 versus the greenback as swaps data indicated a 41 percent chance that the Reserve Bank of Australia will raise rates next month, according to a Credit Suisse AG index.

The Aussie may extend September’s 6.1 percent rise toward the record high of 98.50 U.S. cents set in July 2008 should it strengthen beyond resistance at 95 cents and 96.50 cents, Forecast Pte said, citing trading patterns.

The 95 cents level is “psychological” and the 96.50 cents area represents highs on May 21 and 22, June 9, and July 2, said Pak Lai Ng, a technical analyst at the Singapore-based company. It traded at 94.48 cents after yesterday reaching 94.94 cents, the most since July 2008.

US Yields
Malaysia’s ringgit was close to a 13-year high on speculation the nation’s yield advantage will lure more overseas investment. Bank Negara Malaysia has increased its overnight rate three times this year to 2.75 percent.

The Fed is likely to affirm its pledge to keep interest rates low for an “extended period” and maintain the floor on its holdings of securities, according to economists surveyed by Bloomberg.

“Yields in the U.S. remain low across the curve keeping the dollar reasonably weak,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “It’s more of a soft dollar against other better-placed currencies.”

The ringgit advanced 0.1 percent to 3.1002 per dollar, according to data compiled by Bloomberg. It has rallied 11 percent so far this year, the best performance among Asian currencies.