TOKYO, Aug 24 (Reuters) The euro edged down on Thursday as investors awaited data on the business climate in Germany for more clues about the economic outlook in the euro zone.
The currency rose against the dollar on Wednesday immediately after data showed U.S. existing home sales fell for a fourth straight month in July and marked the slowest pace since January 2004, cementing expectations for U.S. interest rates to stay on hold.
But profit-taking in the euro, which has appreciated 3 percent against the dollar since mid-July, helped the U.S. currency to erase losses.
''The market continues to be driven by the euro,'' said a trader at a Japanese trust bank. ''It will pay close attention to the Ifo's business index and details of German growth.'' Later in the session, Germany's Ifo institute is slated to release its business climate index for August, which is expected to drop for a second month, while the German government will provide a breakdown of growth data in the April-June quarter.
The euro was sold earlier this week after German research institute ZEW said its August economic expectations indicator for the euro zone's biggest economy fell for a seventh straight month to hit a five-year low.
In early Tokyo trade, the euro inched down to $1.2780 from around $1.2790 in late U.S. trade, staying well below the two-month high of $1.2940 touched on electronic trading platform EBS on Monday on a run of upbeat euro zone data.
The euro was a tad lower at 148.75 yen, off a record high of 149.75 yen marked on EBS at the start of the week.
The dollar was nearly flat at 116.40 yen.
Despite profit-taking in the euro in the past few sessions, few dealers believe the currency has fallen out of favour, because of differences in the outlook for rates in the euro zone, the United States and Japan.
The European Central Bank is widely expected to tighten credit further after bumping rates up to 3 percent earlier this month, while the Federal Reserve may not raise rates again after increasing them 17 straight times until it paused this month.
The Bank of Japan raised its overnight call rate in July for the first time in six years but has said the pace of further credit tightening would be gradual.
REUTERS VJ BST0619