* Dollar rally stalls after weak U.S. new home sales data
* Euro on course for biggest monthly fall vs dlr since Jan
* Holiday volumes; U.S. weekly jobless claims at 1330 GMT
(Updates prices; changes byline, dateline; previous TOKYO)
By Jessica Mortimer
LONDON, Dec 24 (Reuters) - The dollar dipped on Thursday,
coming off three-month highs against a basket of currencies
after weak U.S. housing data the previous day dampened optimism
about the outlook for the U.S. economy.
Trading was extremely quiet, however, ahead of Friday's
Christmas holiday in Europe and the United States.
Figures on Wednesday showed sales of new homes unexpectedly
fell 11.3 percent in November, hitting their lowest level in
seven months and serving as a reminder that any economic
recovery would be bumpy.
The data pushed the euro and the yen higher against the
dollar, taking them off their three- and two-month lows hit
earlier in the week.
The dollar, however, stayed close to a three-month high
against a basket of currencies, supported by a growing view that
the U.S. recovery is gathering steam in the wake of recent
positive data, which has pushed up U.S. bond yields.
"The new home sales data was the catalyst to push the dollar
lower - the market has become used to a flow of upside surprises
in U.S. numbers recently and this has just taken a bit of the
shine off the dollar," said Adam Cole, global head of FX
strategy at RBC Capital Markets.
"But until we get back to more normal liquidity conditions
it is difficult to draw too many conclusions from the current
price action," he added.
The dollar index <.DXY>, a gauge of its performance against
six other major currencies, was down 0.3 percent by 0914 GMT at
77.688, sitting below this week's three-month high of 78.449.
Thursday's focus will be on weekly U.S. jobless claims and
durable goods figures as the market tries to gauge if a recent
improvement in monthly payrolls will be sustained and what that
means for the timing of U.S. rate increases. <ECONUS>
November's far lower than expected loss of U.S. non-farm
jobs led some analysts to say the battered labour market was
turning around and triggered a broad rise in the dollar which
has lasted most of this month.
The euro <EUR=> rose 0.3 percent to $1.4367, holding just
above its weakest levels since early September after dipping
near $1.42 this week.
The single currency's falls in recent days, however, still
left it down more than 4 percent against the dollar so far this
month and on course for its biggest monthly fall since January.
The euro has been under pressure from concerns about
sovereign ratings, with Moody's Investors Service this week
becoming the third rating agency this month to downgrade Greece.
But some analysts said charts show momentum for the dollar's
move up against the euro and yen, which has been aided by
year-end closing of short positions against the greenback, may
be tailing off.
"The strength of the dollar seems to be losing traction,"
said Tohru Sasaki, chief FX strategist Japan at JP Morgan
Securities in Tokyo.
"I'm not sure if yesterday was the end of position
adjustment or not but I think the adjustment of the dollar and
the U.S. yield is probably near the end."
The dollar slipped 0.5 percent to 91.22 yen <JPY=> after
touching a two-month high of 91.88 yen this week. Japanese
markets were closed on Wednesday for a public holiday but will
be open on Friday when London and New York are shut.
The dollar has rebounded from a 14-year low of 84.82 yen set
at the end of November. It climbed above its 100-day moving
average on Monday, after mostly trading below that level since
June, and the average is now around 90.90 yen.
(Additional reporting by Charlotte Cooper in Tokyo)
