* Dollar falls from 3-1/2 month highs vs euro
* U.S. new home sales hit seven-month low in November
* U.S. consumer sentiment rises but misses estimates
* Canadian dollar hits more than 2-week high vs greenback
(Updates prices, adds details)
By Wanfeng Zhou
NEW YORK, Dec 23 (Reuters) - The dollar declined for the
first time in five sessions against the euro on Wednesday after
U.S. new home sales unexpectedly fell to a seven-month low last
month, denting optimism about the economy.
The government's housing report also included a downward
revision to the previous month's figure, a day after a report
showing a 7.4 percent jump in November existing home sales
increased hopes the hard-hit housing market was stabilizing.
For more, see [].
Trading was extremely light, which may have exaggerated
currency moves; Tokyo was closed for a national holiday and
many market players elsewhere have already wound down for the
Christmas holidays and year-end.
"It's clearly a disappointing number," said Nick
Bennenbroek, head of currency strategy at Wells Fargo in New
York. "You're going to get bumps along the road every so often
as far as recovery is concerned. It might change sentiment
regarding interest rates and the dollar a little bit."
Optimism about the U.S. economy had stoked expectations the
Federal Reserve may raise its borrowing costs sooner rather
than later, pushing the dollar to a 3-1/2-month high versus the
euro and a basket of six major currencies the previous day.
The euro rose 0.7 percent to $1.4343 <EUR=>. On Tuesday, it
hit a 3-1/2-month low of $1.4216 after a third rating agency
downgraded Greece's credit rating [].
The dollar fell 0.3 percent to 91.58 yen after earlier
climbing to 91.87 yen <JPY=>, its highest level since late
October, according to Reuters data.
Sterling fell to $1.5924, one tick from its weakest level
since mid-October, before recovering to $1.5959, down 0.1
percent <GBP=>. The Bank of England meeting minutes suggested
officials remain open to a possible expansion of an emergency
asset-buying program. []
The euro slipped to 1.4891 Swiss francs <EURCHF=>. Traders
remained wary of possible action by the Swiss National Bank to
curb the franc's strength. The dollar fell 1.1 percent to
1.0375 francs <CHF=>.
CANADIAN DOLLAR GAINS
Analysts said the dollar also dropped as investors sought
to lock in gains on the greenback's recent rise.
"You've seen a big move in euro-dollar already. Folks are
taking some profits on their long dollar positions ahead of the
holiday," said Samarjit Shankar, managing director of global FX
strategy at BNY Mellon in Boston.
Adding to pressure was a survey showing that although a
final reading on U.S. consumer sentiment rose in December, it
fell short of analyst expectations and trailed the preliminary
December figure. See [].
The Canadian dollar hit a more than two-week high against
the U.S. currency after Canadian Finance Minister Jim Flaherty
said in an interview with Bloomberg that China and Russia may
diversify their currency reserves into Canadian dollars. The
greenback was off 0.9 percent at C$1.0474 <CAD=>.
(Reporting by Steven C. Johnson and Wanfeng Zhou; Editing by
Padraic Cassidy)
