Dollar slides on grim U.S. economic outlook

By Vivianne Rodrigues

NEW YORK (Reuters) - The U.S. dollar was lower against a basket of currencies for the sixth day on Tuesday as Federal Reserve Chairman Ben Bernanke gave a grim assessment of the U.S. housing sector, adding to mounting fears of recession.

Still, the U.S. currency staged a late session rebound versus the Japanese yen after U.S. stocks pared some of their sharp losses.

"The bias towards the U.S. dollar remains negative, but we saw it regain some strength versus the yen in late trading as the bounce in stocks abated some risk aversion," said Joe Manimbo, a currency trader at Ruesch International in Washington.

Also on Tuesday, comments by euro finance ministers ahead of the European Central Bank meeting on Thursday helped put a halt to the euro's five-day run versus the dollar. However, investors are convinced that the poor U.S. economic outlook will keep the Fed on its easing path, which adds pressure on the dollar.

"Every time Bernanke and Treasury Secretary (Henry) Paulson speak, the dollar weakens immediately. The problem in our view is that the U.S. representatives are so downbeat on the U.S. economy," said Mark Meadows, currency strategist at Tempus Consulting in Washington.

Bernanke warned that mortgage delinquencies and foreclosers were likely to rise while home prices would fall and he called for active measures to stabilize the housing market.

In late afternoon in New York, the dollar was little changed at 103.26 yen <JPY=>, after it touched a session low of 102.66, near a three-year trough reached on Monday.

Analysts reckon the dollar could fall as low as 100 yen, a level last breached in late 1995. The yen had risen earlier as equities markets fell, which prompted investors to unwind trades that were funded by borrowing in the low-yielding Japanese currency.