By Yasuhiko Seki Dec. 21 (Bloomberg) -- The dollar traded near a three-month high against the euro as demand for the greenback was bolstered by signs the world’s largest economy is gaining traction and on lingering credit concerns regarding Europe. The U.S. currency may extend its biggest weekly rally since June against its major counterparts before reports this week forecast to show increasing home sales in the U.S. The 16-nation euro traded near the lowest level since March against the Swiss franc after the European Central Bank raised its estimate by 13 percent for writedowns in countries using the currency. “Further improvement of the U.S. economic data may give an impetus to buy the dollar,” said Toshiya Yamauchi, manager of foreign-exchange margin trading at Ueda Harlow Ltd. in Tokyo. “The sustained recovery may enhance views that the Federal Reserve may bring forward an exit from stimulus measures.” The dollar traded at $1.4348 per euro as of 1:27 p.m. in Tokyo from $1.4338 in New York on Dec. 18 when it hit $1.4262, the strongest level since Sept. 4. The yen was at 129.60 per euro from 129.75 last week. The U.S. currency was at 90.32 yen from 90.49 yen in New York. The euro was little changed at 1.4951 Swiss francs after touching 1.4909 francs on Dec. 19, the lowest since March 12. The National Association of Realtors will report Dec. 22 that existing home purchases rose 2.5 percent in November to an annual pace of 6.25 million, the highest level since February 2007, according to a Bloomberg News survey of economists. The Commerce Department on Dec. 23 will say sales of new homes rose 1.9 percent to a 438,000 annual pace, the fastest since August 2008, a separate survey showed. Futures Positions Futures traders increased bets that the euro will decline against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission show. The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 16,448 on Dec. 15, compared with net shorts of 511 a week earlier. The Dollar Index, which the ICE futures exchange uses to track the greenback against the currencies of six major trading partners, rose 1.6 percent to 77.821 last week, the biggest rally since the five days ended June 5. Credit Worries Demand for the euro weakened as the European Central Bank said lenders may have to write down an additional 187 billion euros ($268 billion) as loans to property companies and eastern European nations threaten the financial recovery. “With the euro remaining vulnerable to credit problems in the region, the single currency will also explore its downside as people want to close out positions before the Christmas and New Year break,” said Kazumasa Yamaoka, a senior analyst in Tokyo at GCI Capital Co. a foreign-exchange margin-service company. Greece’s credit rating was cut by Standard & Poor’s on Dec. 16, and the company said it may take further action unless Prime Minister George Papandreou tackles the European Union’s largest budget deficit. The euro’s 14-day relative strength index, or RSI, has been below 30 for the past three days, a level some traders view as a sign that a security is oversold. “Technical charts are now signaling that declines of the euro may slow or stall,” Masashi Hashimoto, a Tokyo-based senior analyst at Bank of Tokyo-Mitsubishi UFJ Ltd. “The euro looks to be well bid near the 200 day-moving-average.” The 200- day average for the euro stood at $1.4188 today. Swiss Franc The euro is poised for the longest stretch of losses in three weeks against Switzerland’s currency, as the Swiss National Bank refrained from selling the franc as it strengthened beyond 1.50 to the euro for the first time since a rally in March that led to an intervention. The central bank changed its language on currency purchases this month, saying it will act to counter “any excessive” moves in the franc against the euro. In September, the bank said it would “continue to act decisively” to prevent “any” appreciation. “While the Swiss franc now draws attention as a safe haven, we should also watch for possible action by the SNB,” said Daisaku Ueno, President of Gaitame.Com Research Institute Ltd. in Tokyo, a unit of Japan’s largest currency margin company. “The appreciation of the Swiss currency will hurt income from tourism and jeopardize growth prospects.” To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net

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