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Dollar falls on profit-taking; Aussie, kiwi rise

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The dollar slipped against a basket of currencies on Tuesday as more traders booked profits on bullish greenback bets following the Federal Reserve's interest rate increase last week and a steep drop in existing home sales in November.

Commodity-linked currencies including the Australian and New Zealand dollars rose against the greenback as oil prices stabilized above 11-year lows and investors hoped for more official action to support growth in China.

"As soon as Fed's rate hike was out of the way, we saw a lot of investors getting out of their long dollar positions," said Sireen Harajli at Mizuho Corporate Bank in New York.

The Fed's signal to raise rates at a gradual pace over next few years stoked further selling in the dollar, Harajli said.

The dollar index, which measures the greenback against six currencies, fell 0.16 percent at 98.21. It declined three straight sessions and briefly broke below the 50-day moving average at about 98.02.

The greenback fell 0.07 percent to 121.06 yen after touching its lowest level in a week earlier.

"The trend is still dollar positive as long as the economy performs," said Brian Dangerfield, currency strategist at RBS Securities in Stamford, Connecticut.

U.S. gross domestic product grew at a 2.0 percent annual pace in the third quarter, a tad slower than the 2.1 percent rate reported last month, the Commerce Department said.

Economists polled by Reuters had forecast a downgrade to 1.9 percent.

There were signs that U.S. economic growth might struggle to gain traction. A private report showed existing home sales plunged 10.5 percent in November, their steepest drop since July 2010.

The euro strengthened again, brushing off the indecisive outcome of the Spanish elections over the weekend and its possible risk to economic reforms in the euro zone's fourth-biggest economy.

The single currency was mostly flat at $1.0954 and up 0.3 percent at 132.61 yen at Tuesday's close.

Among other major currencies, the Aussie and Kiwi dollars both gained more than 0.5 percent to $0.7234 and $0.6803, respectively.

There were hopes of steadier prices for oil and other industrial commodities including iron ore, Australia's largest export, after the government announced a series of reforms at a major meeting of China's Communist leadership, analysts aid.

China's yuan dipped marginally against the dollar for a second day with its offshore rates nearly flat at 6.4778 yuan per dollar, halting falls that have taken it to its weakest since a devaluation in August.