NEW YORK (Reuters) - The dollar rose on Thursday after a report showed U.S. new home sales in April rose by more than expected and at their fastest pace in 14 years, reinforcing the view the Federal Reserve may not have to cut interest rates this year.
The greenback surged against the euro and wiped out modest losses against the yen after the report.
Analysts said the data was further evidence that the U.S. housing sector is on the mend, and that a solid U.S. economy will likely allow the Fed to leave interest rates on hold at 5.25 percent for some time to come.
"While one month's data doesn't mean the housing market is out of the woods, this number certainly feeds into a further recalculation of the near-term US outlook, with dollar positive implications," said Brian Dolan, director of currency research at Forex.com in Bedminster, New Jersey.
The euro was trading down 0.28 percent at $1.3423, compared to $1.3445 ahead of the release of the data. The dollar was up 0.01 percent at 121.61 yen.
Eurodollar futures now perceive a chance of less than 50 percent that the Fed will lower interest rates from 5.25 percent by the end of 2007, in contrast to earlier this year when more than a quarter-point rate cut was fully priced in.
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