The dollar fell against the euro as consumer confidence dropped this month to a 15-year low and housing prices plunged in April, reducing speculation the Federal Reserve will increase borrowing costs later this year.
The U.S. currency weakened as the central bank started a two-day meeting at which it's forecast to keep the target lending rate at 2 percent, the lowest level in more than three years. The yen depreciated to an 11-month low versus the euro on speculation Japanese investors will use summer bonuses to buy overseas assets offering higher yields than at home.
``Our short-term outlook is for dollar weakness,'' said Benedikt Germanier, an analyst at UBS AG in Stamford, Connecticut. ``After today's data, the Fed has no reason to talk hawkish tomorrow.'' The dollar may drop to $1.60 per euro within a month, he said.
Crude oil rose for a third day as the weaker dollar enhanced the appeal of commodities as an inflation hedge. Crude oil for August delivery increased as much as 1.5 percent to $138.75 a barrel.
Futures contracts on the Chicago Board of Trade show a 34 percent chance the Fed will increase the target rate for overnight lending between banks by at least a quarter-percentage point at its August meeting, down from 47 percent odds a week ago. The chance of an increase to 2.25 percent tomorrow is 12 percent, compared with 16 percent a week ago.
The U.S. Conference Board reported that its confidence index dropped to 50.4 in June from a revised 58.1 in May. The gauge reached the lowest level since February 1992.
The dollar has gained 1.5 percent against the euro this quarter as traders bet the economic slowdown sparked by the collapse of the subprime-mortgage market will spread to Europe as the U.S. recovers. This year, the dollar is down 6.9 percent.

Most Japan Stocks Rise, Led by Trading Companies on Crude Oil
Most Japanese stocks gained, led by commodities-related companies, after crude oil prices climbed. Steelmaker shares plunged on speculation costs will rise after a Chinese rival accepted a record increase in iron prices.
Mitsubishi Corp., which gets more than half its profit from commodities, led trading companies to their sharpest gain in a week. Nippon Steel Corp., the world's second-biggest steelmaker, and JFE Holdings Inc. led makers of the alloy to the lowest in six weeks.
Mitsubishi, Japan's biggest trading company, climbed 2.1 percent to 3,490 yen, while Itochu Corp., which invests in Russia's Sakhalin oil projects, gained 2.4 percent to 1,177 yen. An index tracking trading companies contributed the most to the Topix's rise.
Crude rose as high as $137.48 a barrel on signs Saudi Arabia's output increase may not boost supply enough to make up for production disruptions in Nigeria.
Bridgestone Corp., the world's largest tiremaker, sank 2.4 percent to 1,766 yen, the lowest since May 29. Bridgestone loses almost $250 million in profit for every $10 gain in the price of oil, a component in synthetic rubber, according to Nikko Citigroup Ltd.
Makers of rubber products were the second-biggest losers among groups on the Topix, following steelmakers.
Nippon Steel sank 2.5 percent to 585 yen, while JFE lost 2.2 percent to 5,390 yen. Smaller rival Mitsubishi Steel Manufacturing Co. dropped 2.6 percent to 528 yen. The Topix Iron & Steel Index closed at lowest since May 13.
Chugai Pharmaceutical Co. dropped 3.8 percent to 1,652 yen. Credit Suisse Group and JPMorgan Chase & Co. both cut their ratings on the Japanese unit of Roche Holding AG.
Furukawa Electric Co., a maker of wire and metal products, rose the most since January 2006 after it raised its profit forecast on a one-time gain from the liquidation of a subsidiary. The shares jumped 8.9 percent to 512 yen, making Furukawa the biggest winner on the Nikkei.

European Stocks Retreat on Oil, Economy; Daimler, Kesa Decline
European stocks fell for a fifth day as higher oil prices and weakening consumer confidence in Germany weighed on carmakers, airlines and retailers, while a drop in mortgage approvals pushed U.K. homebuilders lower.
Daimler AG, the world's second-largest maker of luxury cars, and Ryanair Holdings Plc declined after oil rose for a third day. Kesa Electricals Plc dropped as the electronics retailer refrained from announcing a stock buyback as sales stagnate. Taylor Wimpey Plc slumped as mortgage approvals in the U.K. declined in May to the lowest since at least 1997.
Stocks extended declines after a U.S. report showed consumer confidence fell more than forecast this month to the lowest level in more than 16 years.
National benchmark indexes decreased in all 18 western European markets. France's CAC 40 dropped 0.8 percent, as did Germany's DAX. The U.K.'s FTSE 100 slipped 0.6 percent.
Consumer confidence in Germany, Europe's largest economy, dropped to the lowest in more than two years as soaring energy prices sapped people's purchasing power, according to a separate report today.
Daimler slid 3.8 percent to 41.86 euros. Fiat SpA, Italy's biggest carmaker, retreated 7.9 percent to 10.66 euros.
Ryanair lost 3 percent to 2.87 euros.
Ciba, the world's largest maker of colors for plastics, fell 6.2 percent to 32 francs. Solvay, the biggest maker of soda ash, dropped 4 percent to 88.22 euros. Citigroup cut its recommendation on both stocks to ``sell'' from ``hold.''
Kesa sank 9.6 percent to 157.75 pence after saying it expected ``difficult'' trading conditions ahead. The owner of Darty electronics stores in France and the U.K. Comet chain refrained from announcing a stock buyback to conserve money as sales stagnate.
Taylor Wimpey, the U.K.'s largest homebuilder, lost 12 percent to 57.25 pence. Bellway Plc, a U.K. homebuilder aimed at first-time buyers, slipped 5 percent to 467.5 pence.
U.K. mortgage approvals declined to the lowest since at least 1997 in May as the slumping property market discouraged buyers, a report by the British Bankers' Association showed.

U.S. stocks retreated to a three- month low after consumer confidence weakened and United Parcel Service Inc. said rising fuel costs will reduce profit.
UPS, the biggest package shipment company, tumbled the most in almost two years after predicting second-quarter earnings below analyst estimates. Dow Chemical Co., the largest U.S. chemical producer, slumped to the lowest since March as Deutsche Bank AG cut profit estimates. Prospects that the worsening outlook for the economy may forestall interest-rate increases helped financial shares rebound from the lowest level since 2003.
UPS lost $4, or 6 percent, to $62.26, an almost-five-year low. Earnings will be 83 cents to 88 cents a share, down from the range of 97 cents to $1.04 projected on April 23, the company said. The average estimate of 16 analysts surveyed by Bloomberg was 98 cents.
Raw-materials producers fell the most among 10 S&P 500 industries, losing 2.5 percent.
Dow slid $1.04, or 2.8 percent, to $36.58. David Begleiter, a New York-based analyst at Deutsche Bank, reduced his second- quarter and full-year earnings estimates for Dow because of rising costs and ``signs of demand destruction in the U.S.'' Dow said it will raise prices as much as 25 percent in July, the largest increase in company history and the second in two months, to recoup surging energy and raw-material costs.
Freeport-McMoRan Copper & Gold Inc., the world's second- largest producer of copper, fell as the metal retreated for a second day on concern slowing global growth will reduce demand. Freeport-McMoRan lost $2.83 to $115.72.