NEW YORK (CNNMoney.com) -- The dollar lost ground against other currencies Tuesday after an inflation report showed a further rise in wholesale prices, and housing starts fell to a 17-year low.

The 15-nation euro bought $1.4765, up from the $1.4697 in late trading Monday.

The dollar also fell against the Japanese currency, sinking to ¥109.67 from ¥110.17 in the previous session. The British pound bought $1.8651 Tuesday compared with $1.8643 Monday.

The Producer Price Index (PPI), a measure of inflation at the wholesale level, rose 1.2% in July, double what economists surveyed by Briefing.com were expecting. So-called "core" PPI, which strips out volatile food and energy prices, rose by 0.7%, more than three times what economists expected.

"The PPI has an effect on the dollar movement because eventually consumers will pay for those prices," said Dustin Reid, senior currency strategist with ABN AMRO.

The Census Bureau reported Tuesday that both housing starts and building permits - a measure of builder confidence - fell to levels in July not seen since the 1991 recession as the housing market fallout continued.

"Coupled with the negative news that the financial sector has seen, the market is thinking that there's going to be a lot more to go in terms of an economic housing crisis," Reid said.

The dollar has fallen for two straight sessions after rebounding strongly for several weeks. The euro fell to a six-month low Friday, and the pound hit its lowest point in over a year as weakness in the European economies became more apparent.

Both the European Central Bank and Bank of England indicated that the European economic slowdown may lead to a steadying or even trimming of key interest rates.

"We are ripe to see a bit of pause in the dollar rally, as we have further to go with concerns in the financial and housing sectors," said Reid. "The question remains is this the beginning of something significant or a short term head fake? Only time will tell."