* Euro slips vs dollar as traders book profits on rally
* Persistent worries about Greece weigh on euro
* Investors await FOMC minutes for clues to rate outlook (Adds details, updates prices)
By Vivianne Rodrigues
NEW YORK, Feb 17 (Reuters) - The dollar rose sharply on Wednesday, lifted by stronger-than-expected U.S. housing and industrial output data, while investor sentiment remained bearish on the euro.
The single currency failed to sustain early gains against the dollar as traders booked profits from Tuesday's rally. 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. For details, see [ID:nN17114831].
"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 midday trading in New York, the dollar was 0.7 percent
higher at 90.75 yen
The euro fell 1.1 percent to as low as $1.3598
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. [ID:nLDE61F0XT]
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 euro zone peripheral 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 better performance in recent days had more to do with positioning adjustments than structural improvements on the currency union's outlook.
FOMC MINUTES EYED
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.
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 central bank should shed some of the assets it bought to stabilize the economy during the global financial crisis. [ID:nN16114707]
"When you have one FOMC member voting in favor of more hawkish language in the monetary policy statement, additional members are likely to follow suit and traders will be looking to see if this sentiment is reflected in the minutes," Kathy Lien, director of currency research at GFT, said in a note.
"If the minutes reveal optimism, it could fuel further gains in the dollar." (Additional reporting by Wanfeng Zhou; Editing by Leslie Adler)