FOREX-Dollar rally stalls after weak U.S. housing data

* Dollar rally stalls after weak U.S. new home sales data

* Euro on course for biggest monthly fall vs dlr since Jan

* Holiday volumes; U.S. weekly jobless claims at 1330 GMT

(Updates prices; changes byline, dateline; previous TOKYO)

By Jessica Mortimer

LONDON, Dec 24 (Reuters) - The dollar dipped on Thursday, coming off three-month highs against a basket of currencies after weak U.S. housing data the previous day dampened optimism about the outlook for the U.S. economy.

Trading was extremely quiet, however, ahead of Friday's Christmas holiday in Europe and the United States.

Figures on Wednesday showed sales of new homes unexpectedly fell 11.3 percent in November, hitting their lowest level in seven months and serving as a reminder that any economic recovery would be bumpy.

The data pushed the euro and the yen higher against the dollar, taking them off their three- and two-month lows hit earlier in the week.

The dollar, however, stayed close to a three-month high against a basket of currencies, supported by a growing view that the U.S. recovery is gathering steam in the wake of recent positive data, which has pushed up U.S. bond yields.

"The new home sales data was the catalyst to push the dollar lower - the market has become used to a flow of upside surprises in U.S. numbers recently and this has just taken a bit of the shine off the dollar," said Adam Cole, global head of FX strategy at RBC Capital Markets.

"But until we get back to more normal liquidity conditions it is difficult to draw too many conclusions from the current price action," he added.

The dollar index <.DXY>, a gauge of its performance against six other major currencies, was down 0.3 percent by 0914 GMT at 77.688, sitting below this week's three-month high of 78.449.

Thursday's focus will be on weekly U.S. jobless claims and durable goods figures as the market tries to gauge if a recent improvement in monthly payrolls will be sustained and what that means for the timing of U.S. rate increases.

November's far lower than expected loss of U.S. non-farm jobs led some analysts to say the battered labour market was turning around and triggered a broad rise in the dollar which has lasted most of this month.

The euro rose 0.3 percent to $1.4367, holding just above its weakest levels since early September after dipping near $1.42 this week.

The single currency's falls in recent days, however, still left it down more than 4 percent against the dollar so far this month and on course for its biggest monthly fall since January.

The euro has been under pressure from concerns about sovereign ratings, with Moody's Investors Service this week becoming the third rating agency this month to downgrade Greece.

But some analysts said charts show momentum for the dollar's move up against the euro and yen, which has been aided by year-end closing of short positions against the greenback, may be tailing off.

"The strength of the dollar seems to be losing traction," said Tohru Sasaki, chief FX strategist Japan at JP Morgan Securities in Tokyo.

"I'm not sure if yesterday was the end of position adjustment or not but I think the adjustment of the dollar and the U.S. yield is probably near the end."

The dollar slipped 0.5 percent to 91.22 yen after touching a two-month high of 91.88 yen this week. Japanese markets were closed on Wednesday for a public holiday but will be open on Friday when London and New York are shut.

The dollar has rebounded from a 14-year low of 84.82 yen set at the end of November. It climbed above its 100-day moving average on Monday, after mostly trading below that level since June, and the average is now around 90.90 yen.

(Additional reporting by Charlotte Cooper in Tokyo)