* Dollar drops vs euro, yen and Swiss franc
* Two-year Treasuries rally on CPI, weak U.S. housing data
* LCH doubles margin requirement on Irish gov't bonds
(Updates with U.S. markets' close)
By Jennifer Ablan
NEW YORK, Nov 17 (Reuters) - The dollar fell against the
euro, yen and Swiss franc on Wednesday as the lack of a
solution to Ireland's debt crisis weighed on markets.
Stocks were slightly higher to little changed, with Wall
Street unable to overcome the prior session's selloff. A late
drop in U.S. bank shares offset gains by retailers.
Treasuries prices rose after U.S. government figures showed
the lowest core annual inflation rate on record and a steep
drop in housing starts from already depressed levels. The data
supported the case for the Federal Reserve to buy government
bonds to stimulate the economy.
The euro rose as high as $1.3539 and last traded at
$1.3521, up 0.21 percent from the prior close <EUR=>. The
dollar was down 0.04 percent at 83.23 yen <JPY=> and last
traded at 0.9895 Swiss francs <CHF=>, down 0.6 percent.
Tokyo stocks looked set to open down, with December Nikkei
futures <NKZO> traded in Chicago off 15 points at 9825.
Euro zone finance ministers have agreed to lay the
groundwork for bailing out Ireland's banking sector with the
International Monetary Fund. Dublin has yet to decide whether
to request the aid.
Nervousness about the debt crisis grew after European
clearing house LCH. Clearnet doubled its margin requirement on
Irish government bonds to 30 percent of net positions, citing
higher Irish yields over German benchmarks.
"If we get a resolution to Ireland's problems, you could
see the euro bounce," said Omer Esiner, chief market analyst at
Commonwealth Foreign Exchange in Washington. "The overall bias
is to the downside, given uncertainty about not just Ireland
but Portugal and Spain."
The euro briefly gained after a report showed U.S. consumer
prices rose less than expected in October and the increase in
the year-on-year core rate was the smallest on record. For
details, see []. But the single currency has lost
3.2 percent this month as investors cut long positions as
peripheral debt worries mount.
World markets were also hit by interest rate concerns
involving China, the global growth engine. Premier Wen Jiabao
said his government was preparing steps to tame price rises.
"Chinese rate hike prospects are one thing (affecting
markets). There is also the prospect of tighter measures on
inflows in Asia, especially Korea," said Gaelle Blanchard,
emerging markets strategist at Societe Generale.
Chinese shares closed down 1.9 percent, sending wider Asian
stocks to their lowest levels in four weeks and hitting other
countries that depend on China's growth, such as Australia.
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U.S. Treasury debt prices on the short end of the yield
curve, the most sensitive to moves by the Fed, were higher on
weak consumer price and housing data. Starts on new homes
slumped to the lowest in 1-1/2 years in October, the government
said.
The 2-year U.S. Treasury note <US2YT=RR> was up 1/32, with
the yield at 0.48 percent. But longer-dated Treasuries prices
slipped in a late sell-off on uncertainties over the fate of
the Federal Reserve's bond program to help the economy.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was
down 10/32, with the yield at 2.88 percent and the 30-year U.S.
Treasury bond <US30YT=RR> was down 7/32, with the yield at 4.28
percent.
On Wall Street stocks ended little changed, with indexes
unable to recoup recent losses as banks wilted on worries about
Federal Reserve regulation of the sector going forward.
The Dow Jones industrial average <> was off 15.62
points, or 0.14 percent, to 11,007.88. The Standard & Poor's
500 Index <.SPX> edged up 0.25 point, or 0.02 percent, at
1,178.59. The Nasdaq Composite Index <> added 6.17 points,
or 0.25 percent, to 2,476.01.
MSCI's all-country world stock index <.MIWD00000PUS> rose
0.17 percent while the FTSEurofirst 300 <> index of
leading European shares advanced by 0.54 percent to 1,092.46.
In energy and commodities prices, U.S. light sweet crude
oil <CLc1> fell $1.85, or 2.25 percent, to $80.49 per barrel,,
and spot gold prices <XAU=> fell $4.56, or 0.34 percent, to
$1335.80. The Reuters/Jefferies CRB Index <.CRB> was down 0.79
points, or 0.27 percent, at 295.43.
(Additional reporting by Leah Schnurr, Wanfeng Zhou and Nick
Olivari; Editing by Kenneth Barry)
