Dollar slips on housing, trade worries

By David McMahon

NEW YORK (Reuters) - The dollar slipped across the board on Tuesday, weighed down by persistent worries about the health of the U.S. housing market and concerns that a trade dispute between the United States and China is escalating.

Shares in American Home Mortgage Investment Corp AHM.N tumbled on Monday after the real estate investment trust slashed its profit forecast, and continued to slide on Tuesday. The news was taken as evidence that problems in the subprime mortgage market may be spreading to higher-quality loans in the sector.

In another development, the United States on Tuesday accused China at the World Trade Organization of piracy and blocking access to U.S. films, books and software. This was seen as another sign that U.S. protectionism could be on the rise.

"You've got the double blow of housing worries and protectionism hurting the dollar," said Kathy Lien, strategist at DailyFX.com.

Elsewhere, the yen hit a record low against the euro after the Bank of Japan left interest rates on hold at 0.5 percent as expected, and gave no sign that Japanese rates will rise anytime soon from the lowest level in the industrialized world.

The euro rose as high as 160.10 yen on the EBS electronic trading system, a record since the euro's launch in 1999. The dollar was down 0.2 percent at 119.12 yen JPY=, off last week's six-week high of 119.38.

Against the dollar, the euro was up 0.6 percent on the day at $1.3435 EUR= after matching a two-year peak of $1.3442 hit last week.

BOJ Governor Toshihiko Fukui said the bank will adjust interest rates gradually in line with the economy and prices.

The European Central Bank also holds a monetary policy meeting this week. The ECB is expected to leave rates on hold at 3.75 percent on Thursday, before raising them again this year, perhaps in June.

The day's most notable gainer was the Australian dollar, which rose to its highest level since 1990 against the U.S. dollar as robust domestic economic data boosted expectations for another rise in Australian interest rates next month.

The Aussie dollar was up 0.9 percent at $0.8245 after touching a peak of $0.8252.