* US dollar falls against euro, currency basket
* Pound hits 6-1/2-yr low vs dlr, near parity with euro
* Swiss franc supported by Israel-Hamas conflict
* Prices of US single-family homes plunge in October
(Adds comments, changes byline and dateline, previous
LONDON)
By Vivianne Rodrigues
NEW YORK, Dec 30 (Reuters) - The U.S. dollar fell against
the euro and a basket of currencies on Tuesday as weak U.S.
housing data and a dim economic outlook for the start of 2009
weighed on the currency.
The contrast of aggressive monetary easing in the United
States versus a more cautious European Central Bank is lending
support to the euro while hurting the greenback, analysts said.
Some market participants also cited the ongoing conflict in
Gaza and Israel, as supporting the Swiss franc near a
five-month high.
Meanwhile, sterling continued its downtrend, hitting a
6-1/2 year low against the U.S. dollar and hovering near record
lows in sight of parity against the euro on prospects of UK
interest rates being cut further amid a deep economic
downturn.
In morning trading in New York, the euro <EUR=> was up 1.2
percent on the day at $1.4148, according to Reuters data.
"The Fed continues to be extremely proactive while the ECB
has been much more cautious," said Jessica Hoversen, a fixed
income and currency analyst at MF Global Ltd. in Chicago. "As a
result, we have the end of the year yield differentials between
the two regions that favor the euro, at least for now."
U.S. interest rates are close to zero and policymakers have
said they are ready to take more unconventional steps of
providing liquidity to bolster the moribund economy.
In contrast, key interest rates in the euro zone stand at
2.5 percent, and policymakers have been unclear about how much
rates will be cut further in the near future.
Hoversen added thin market conditions during the holidays
and a weak outlook for key U.S. sectors, such as housing, may
help push the dollar lower in the next couple of days.
Prices of U.S. single-family homes in October plunged a
record 18.0 percent from a year earlier, according to the
Standard & Poor's/Case-Shiller Home Prices Indices released on
Tuesday. For details, see []
"The numbers are certainly very bad," said Kathy Lien,
director of FX research at GFT Forex in New York. "But there is
one silver lining though. The pace of the decline seems to have
slowed during the month."
The U.S. dollar index <.DXY> slipped about one percent
against a basket of currencies to 80.595.
EURO NEARS PARITY
Sterling <GBP=> fell as low as $1.4385, its weakest since
early 2002, according to Reuters data, while the euro
<EURGBP=D4> rose 1.4 percent to 97.79 pence, hovering near a
record high of 98 pence hit on Monday.
"The market has been focusing a lot on the weakness in the
U.K. economy," said Hoversen at MF. "It seems the pound will be
'forced' to touch parity with the euro pretty soon."
Demand for the Swiss franc rose since Monday after the
Israeli attacks at Gaza had triggered so-called "safe-haven"
demand for the Swiss currency and gold. The dollar was last
slightly lower at 1.0586 <CHF=>, after trading as low as 1.0367
francs on Monday, its weakest since late July,
The dollar <JPY=> slipped 0.2 percent to 90.36 yen, inching
lower to 87.13 yen hit earlier in the month, its weakest since
mid-1995.
Data highlights on Tuesday also include a release on
consumer confidence in December and a reading of factory
activity by the Institute of Supply Management.
(Additional reporting by Tamawa Desai in London)
