U.S. Dollar Falls to Three-Month Low on Concern U.S. Growth Slowing (Bo Nielsen and Ye Xie)

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The dollar fell to the lowest level this year against the euro and dropped against the yen on concern a slowing U.S. economy is reducing the appeal of U.S. debt.

By Bo Nielsen and Ye Xie

March 16 (Bloomberg) -- The dollar fell to the lowest level this year against the euro and dropped against the yen on concern a slowing U.S. economy is reducing the appeal of U.S. debt.

The U.S. currency headed for its biggest weekly loss against the euro since early December on speculation more homebuyers with poor credit histories will fall behind on mortgages. A government report showed consumer prices rose last month more than economists expected. U.S. stocks fell, suggesting aversion to riskier assets was returning.

``Inflation is stubbornly above the Fed's comfort zone, but growth is well below expectations,'' said Tim Mazanec, senior currency strategist in Boston at Investors Bank & Trust Co. ``That's not a strong-dollar scenario.''

The dollar fell 0.64 percent to $1.3322 per euro and dropped 0.55 percent to 116.92 yen at 10:03 a.m. in New York. The U.S. currency earlier dropped to $1.3339 per euro, the lowest level since Dec. 8.

The difference in yield, or spread, between the two-year Treasury note and a comparable German bond widened 3 basis points to 0.7125 percentage points.