Dollar claws back ahead of more housing data

TOKYO (AFP) - The dollar extended a rebound against the euro and yen in Asian trade Thursday, winning respite from recent heavy selling fuelled by worries about the US housing market, dealers said.

The dollar rose to 120.68 yen in Tokyo morning trade from 120.47 yen in New York late Wednesday.

The euro eased to 1.3708 dollars from 1.3721 dollars, while edging up to 165.37 yen after 165.30.

"Dollar selling seems to have run its course for now," said Masaki Fukui, senior market economist at Mizuho Corporate Bank.

"But the concerns over US credit problems are still very strong," capping the dollar's upside, he added.

The market is waiting nervously for the release of US new home sales figures for June later Thursday, dealers said.

The dollar has come under heavy pressure in recent weeks on fears that a wave of defaults in the US sub-prime mortgage market for people with patchy credit histories could dampen consumer spending and slow economic growth.

Dealers said the unit benefited from a flight to safety in US trade Wednesday on concerns that the US sub-prime shake-out could also affect financial markets outside of the US.

The dollar was also buoyed by news that the median price for an existing home in the United States rose in June, the first annual gain for nearly a year.

The report supported the dollar despite the fact that the number of existing home sales fell 3.8 percent in June to a 5.75-million-unit annual pace, much lower than the expected 5.90 million units, dealers said.

Commonwealth Bank economist Joseph Capurso said there was still little sign of a bottoming-out of the US housing market and that more weakness could be expected in the coming months.

The New Zealand dollar weakened slightly immediately after the Reserve Bank of New Zealand (RBNZ) increased its official cash rate by 25 basis points to 8.25 percent but signalled that further increases may not be necessary.

The currency has risen to the highest levels against the US dollar since it was freely floated in 1985.