* Dollar index falls vs FX basket before Fed rate decision
* Fed seen cutting rates by at least 50 bps from 1 pct
* Fed may offer clues on plans for quantitative easing
* Dollar slips below 90 yen after Goldman Sachs posts loss
(Adds quotes, updates prices, changes byline, changes
dateline, previous LONDON)
By Wanfeng Zhou
NEW YORK, Dec 16 (Reuters) - The U.S. dollar fell to a
two-month low against the euro and a basket of currencies on
Tuesday on bleak housing news that added to speculation the
Federal Reserve will cut interest rates to near zero.
The dollar fell below 90 yen as investors cut their
exposure to risk after Goldman Sachs <GS.N> posted a its first
loss as a public company.
The yen's rise to near a 13-year high increased speculation
Japan may intervene to stem the currency's strength, which
threatens the competitiveness of its exports.
Few doubt that U.S. central bank will cut its interest
rates from the current 1 percent. Investors will look for clues
in the Fed's statement about its intention to undertake
alternative policy measures to restore growth.
"It seems like a fait accompli that they'll go 50 basis
points, so it's not clear how much of a market impact that will
have," said Brian Dolan, chief currency strategist at Forex.com
in Bedminster, New Jersey.
"What will be interesting is if they mention anything
specific about quantitative easing measures, though it might be
better to deal with that in a separate statement."
In early New York trading, the ICE futures U.S. dollar
index, which tracks the value of the greenback against a basket
of six currencies fell 0.4 percent to 81.740 <.DXY>., after
falling as low as 81.716, the worst level since mid-October.
The euro was up 0.2 percent on the day against the dollar
<EUR=> at $1.3748 after hitting a two-month high of $1.3759.
The euro had earlier come under pressure after purchasing
managers' surveys painted a bleak outlook for the region's
economy.
U.S. data showed new housing starts and permits plunged to
record lows in November, while consumer prices dropped at a
record rate for a second straight month. See [].
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"Starts are stunningly weak, but I can't say this should
come as a complete shock," said Alan Ruskin, chief
international strategist at RBS Global Banking and Markets in
Greenwich, Connecticut.
"The data will similarly do nothing to deter market
thoughts that the Fed is also en route to more aggressive
quantitative easing, starting with some pronouncements today
after the rate cut when the Fed is sure to make clear that it
feels it has not run out of ammunition."
Against the yen, the dollar fell 1 percent to 89.85 <JPY=>,
after dropping to session lows at 89.73, near a 13-year low of
88.10 yen reached last week.
(Additional reporting by Steven C. Johnson; Editing by Tom
Hals)
