* Persistent worries about Greece weigh on euro
* Investors await FOMC minutes for clues to rate outlook (Recasts, updates prices)
NEW YORK, Feb 17 (Reuters) - The dollar rose to a two-week high against the yen and rallied against the euro on Wednesday, lifted by stronger-than-expected U.S. housing and industrial output data, and bearish investor sentiment on the euro.
The euro zone single currency failed to sustain early gains against the dollar as traders bet that Tuesday's rally had gone too far, too fast. Declines in the euro accelerated as reports showed U.S. housing starts rose to a six-month high in January and industrial output rose a solid 0.9 percent.
"When it comes to economic fundamentals, the U.S. is ahead of most other regions," said Jessica Hoversen, fixed income and currency analyst at MF Global Ltd in Chicago. "If you combine that with the fact that the situation in Greece is still very far from being reconciled, what you get is support for the dollar."
In early afternoon trading in New York, the dollar was 0.8 percent higher at 90.82 yen after touching a session high of 91.15 yen in the aftermath of the data.
The euro fell to as low as $1.3598 from as high as $1.3779 on Tuesday. It last traded down 1.1 percent at $1.3608.
The euro fell even after European finance ministers on Tuesday gave Greece a one-month reprieve until March 16 to show its deficit reduction plan was being rolled out effectively. They set the same deadline for themselves to decide what should happen next.
The euro has fallen almost 5 percent against the dollar since the start of the year on concerns about Greece's fiscal health and that of other peripheral euro zone countries. Currency speculators raised net euro short positions to a record high last week.
There's "no indication that the Greek debt crisis has ended," said Michael Woolfolk, a senior currency strategist at BNY Mellon in New York. "Without a definitive resolution to how the EU intends to bring chronic fiscal deficit offenders back into line, the risk of contagion will likely persist with the dollar remaining the safe haven of first choice."
Currency strategists at UBS AG said in a note they believe the euro's stronger performance in recent days had more to do with positioning adjustments than structural improvements on the currency union's outlook.
In the United States, investor focus now may shift to the Federal Reserve's January policy meeting minutes, due out at 2 p.m. (1900 GMT) for insights into the U.S. central bank's exit strategy from ultraloose monetary policy.
There was "stronger economic news this morning and I am guessing that many think that will show up in the FOMC minutes this afternoon," said Andrew Bekoff, chief investment officer at Family Office Group in New York.
The president of the Kansas City Federal Reserve Bank, Thomas Hoenig, who dissented in January against the Fed's pledge to keep rates low for an "extended period," said on Tuesday the U.S. central bank should shed some of the assets it had bought to stabilize the economy during the global financial crisis. (Reporting by Nick Olivari and Vivianne Rodrigues; Editing by James Dalgleish)