The dollar dropped against the yen Thursday, dragged down by disappointing news in the U.S. housing sector and steep losses on Wall Street.
But it rose to a two-week high against the euro, as the single currency came under heavy pressure after a slew of soft euro-zone data cooled expectations of higher interest rates.
"(The existing home sales report) just underscores that the U.S. economy is by no means out of the woods," said Stephen Malyon, senior currency strategist at Scotia Capital in Toronto.
He added that "the run of strength the dollar has enjoyed over the past several sessions is unlikely to extend...further as the market turns its focus to the deteriorating fundamentals backdrop in the U.S."
In New York, the euro fell less than 0.5 percent to near $1.56, well below its record high of $1.6037 set last week according to Reuters Dealing. It had earlier slipped to $1.5637, the lowest in more than two weeks, immediately after the German Ifo business climate report.
The Ifo report followed data showing falls in manufacturing and service sector activity in France, Germany and the wider euro zone.
Against the yen , the dollar dropped 0.3 percent to 107.62 Modest gains in oil prices have weighed on the dollar, which would likely be helped by an economy-boosting decline.
On Thursday, U.S. crude futures rose 0.2 pct to $124.75 per barrel.
The pace of existing home sales in the U.S. fell in June to a 4.86 million-unit annual rate, the National Association of Realtors said. Economists polled by Reuters were expecting a drop to 4.93 million.
Earlier, the greenback also softened after a government report showed initial jobless claims rose more than expected in the latest week.
Sluggish Euro Zone
The Munich-based Ifo economic research institute said its index of German corporate sentiment dropped to 97.5 from a revised 101.2 in June. This was much weaker than market expectations for a reading of 100.0 and took the index to its lowest level since September 2005.
But given the apparent bleakness of the Ifo headline data, the euro's losses weren't as heavy as they might have been, analysts say.
"FX traders speculated that the reading in sentiment may have been skewed by record high oil prices and with crude dropping more than $20 a barrel since the start of this month, Ifo would rebound in August," said Boris Schlossberg, senior currency strategist at DailyFX.com in New York, said in a research note.
"Nevertheless, the news cannot be viewed as anything but negative for the single currency," he added. "Given such rapidly deteriorating economic conditions it is difficult to imagine that the European Central Bank would be willing to tighten further and risk tipping the world's largest economic zone into a full-blown recession."
The biggest mover among the major currencies on Thursday was sterling, which fell sharply against the euro and dollar on the 3.9 percent fall in June UK retail sales.
The pound was last down 0.8 percent at $1.9825.
The New Zealand dollar fell to a six-month low at US$0.7404, still reeling after the Reserve Bank of New Zealand cut its cash rate by a quarter percentage point to 8 percent. It last traded at US$0.7409, down half a percent from late on Wednesday.