Dollar up vs euro as new home sales data awaited

NEW YORK, May 24 (Reuters) The dollar rose against the euro on Thursday after an unexpectedly soft German business sentiment survey but was little changed against other majors ahead of U.S. housing data which may give clues on the interest rate outlook.

The euro crept lower after the Ifo economic research institute said that its business climate index in the euro zone's largest economy was unchanged in May from the previous month, in contrast to forecasts for a modest rise.

The dollar held steady in early New York trade after a report showed U.S. durable goods orders -- a leading indicator of capital spending -- rose by less than expected in April, but the previous month's reading was revised up sharply.

Data later on Thursday is expected to show sales of new U.S.

homes held steady in April, which would likely reinforce a growing view that the economy may be strong enough to lead the Federal Reserve to keep benchmark rates unchanged this year.

''This data is decent but probably not enough to give the dollar much lift in the short run,'' said Shaun Osborne, senior currency strategist at TD Securities in Toronto. ''I still think we'll head down toward upper 1.33s in euro-dollar but we probably need to see stronger numbers to get us there. We'll have to wait for the housing data to see.'' In early morning trading in New York, the euro was down 0.15 percent at $1.3440. The dollar was down 0.16 percent at 121.40 yen, but was flat on the day against a basket of six major currencies.

The greenback has rebounded over the past month as a crop of robust U.S. economic data has led the market to pare back expectations that the Fed will cut interest rates this year.

Eurodollar futures reflect little more than a 50 percent chance that the Fed will lower the overnight federal funds rate from 5.25 percent by the end of 2007, in contrast to earlier this year when more than a quarter-point cut was fully priced in.

REUTERS SR GC2040