* Dollar down after recent rally as traders book profits
* Euro rises above $1.44 but on pace for big monthly fall
* U.S. durable goods orders rise; jobless claims fall (Updates prices, adds quotes, changes byline, changes dateline, previous LONDON)
By Wanfeng Zhou
NEW YORK, Dec 24 (Reuters) - The dollar fell against the euro on Thursday, extending losses after weak U.S. housing data the previous day, as investors sought to lock in gains on the greenback's recent rally.
The dollar's losses were limited after data showing a rise in U.S. durable goods orders for November and a drop in initial jobless claims in the latest week rekindled optimism about the prospects for a recovery. For details, see [ID:nN24182625] [ID:nN23158877].
Trade was extremely thin in Europe and the United States ahead of Friday's Christmas holiday, and traders were wary of reading too much into current price movements.
"We moved in very much of a straight-line fashion with the dollar higher and euro lower for the last three weeks," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey. "We're long overdue for a correction."
The data "is all pretty solid and continues the trend of data signifying improvement in the U.S. economy. The trend lately has been for the dollar to respond more directly to positive numbers," he added.
Figures on Wednesday showed sales of U.S. new homes unexpectedly fell to their lowest level in seven months in November [ID:nN23158201], pushing the dollar down and lifting the euro, yen and other major currencies off multi-week lows.
"This year has been totally dominated by the ebb and flow of risk appetite, but over the last month or so we have started to see the dollar's fortunes returning to more normal drivers, like its own economic data," said Richard Wilshire, FX Broker at ETX Capital.
In early trading, the euro
The single euro zone currency dipped near $1.42 this week, dented by concerns about sovereign ratings after a third ratings downgrade on Greece's debt. The euro's fall in recent days left it down 4.2 percent against the dollar so far this month and on course for its biggest monthly fall since January.
The dollar slipped 0.1 percent to 91.57 yen
Traders said options expiries in dollar/yen later Thursday at 90.50, 91.00 and 91.50 yen may rein in moves in the pair.
The ICE Futures U.S. dollar index <.DXY>, a gauge of the greenback against six other major currencies, was down 0.2 percent 77.762, not far from this week's three-month high of 78.449.
The dollar remained close to recent highs, but some analysts said charts showed momentum for the dollar's move up against the euro and yen -- aided by year-end closing of short positions against the greenback -- may be tailing off.
"I think the adjustment of the dollar and the U.S. yield is probably near the end," said Tohru Sasaki, chief FX strategist Japan at JP Morgan Securities in Tokyo. (Additional reporting by Jessica Mortimer in London; Editing by Padraic Cassidy)