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Dollar Flat Against Euro in Thin Pre-Holiday Trading

The dollar finished flat against the euro and little changed against the yen as trade thinned and investors wound up their books ahead of the holidays.

A report showing the U.S. economy grew at a slightly slower pace than previously estimated had little impact, while a survey detailing a sharp decline in mid-Atlantic area factory activity sparked a brief dollar decline versus the euro that was later reversed.

Traders said technical factors, not economic fundamentals, were driving most of the price action.

"Really the numbers are going to be inconsequential for the next few days as people square up their books," said Greg Salvaggio, vice president of trading at Tempus Consulting in Washington, D.C.

The euro was flat against the dollar. Salvaggio said there remains "very good interest to buy euros in the low $1.31s," which should keep the two currencies in range.

The euro was down against the yen after hitting a record high at 156.42 overnight, according to electronic trading platform EBS, while the dollar was changing hands at 118.38 yen, virtually flat.

Sterling was weaker .

Some analysts said Thursday's data fits with other signs of slower U.S. growth in the months ahead and could cause trouble for the dollar after the holidays.

The Philadelphia Fed's index of business conditions fell back into negative territory at -4.3 in December, well below last month's 5.1 reading.

Weakness in the manufacturing and housing markets has sparked fears about the underlying health of the U.S. economy heading into 2007 and has some investors betting the Fed will cut rates early next year.

"Ultimately it's not very good news for the dollar and it is confirming the fact that the economy is slower," said Boris Schlossberg, strategist at Forex Capital Markets in New York.

Given the dollar-negative nature of the data and the possibility for sharp price swings during a period of thin liquidity, some said dollar selling may resume.

"It may be too soon to really call an end to the dollar selling for the day. It could emerge later in the day," said Bank of New York strategist Michael Woolfolk.

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