* Dollar falls vs yen, weighed down by housing news
* U.S. existing home sales fall 2.6 percent
* Soft euro-zone data hurts euro (Recasts, updates prices, changes byline)
By Vivianne Rodrigues
NEW YORK, July 24 (Reuters) - The dollar fell against the yen on Thursday, dragged down by disappointing news in the U.S. housing sector and steep losses on Wall Street.
However, the greenback was slightly higher against the euro, which came under pressure as soft data cooled expectations of higher euro-zone interest rates.
"The U.S. economy is by no means out of the woods," said Stephen Malyon, senior currency strategist at Scotia Capital in Toronto. "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 late trading in New York, the euro fell 0.1 percent on the day to $1.5672 <EUR=>, well below its record high of $1.6037 set last week according to Reuters Dealing. It had earlier slipped to $1.5630, the lowest in more than two weeks, immediately after the German Ifo business climate report.
The Ifo report followed data showing declines in manufacturing and service sector activity in France, Germany and the wider euro zone. For more see [ID:nL24105706].
Against the yen, the dollar dropped 0.6 percent to 107.30 JPY. Modest gains in oil prices also weighed on the dollar on Thursday. U.S. crude futures rose 0.8 pct to $125.49 per barrel CLc1.
The pace of U.S. existing home sales 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. [ID:nL24752703]. In another report, the government said initial jobless claims rose more than expected in the latest week. [ID:nN23450938].
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, well below market expectations for a reading of 100.0.
This took the index to its lowest since September 2005, but despite the apparent bleakness of the headline data, the euro's losses weren't as heavy as they might have been, analysts said.
"FX traders speculated that the reading in sentiment may have been skewed by record high oil prices and with crude dropping more than $20/bbl since the start of this month, Ifo would rebound in August," 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 (euro)," he added. "Given such rapidly deteriorating economic conditions it is difficult to imagine that the European Central Bank would be willing to tighten (monetary policy) further and risk tipping the world's largest economic zone into a full-blown recession."
The biggest mover among 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. [ID:nL4056396].
The pound was last down 0.7 percent at $1.9836 <GBP=>.
The New Zealand dollar <NZD=D4> fell earlier to as low as US$0.7387, 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$0.7405, down half a percent from late on Wednesday. (Additional reporting by Wanfeng Zhou and Lucia Mutikani; Editing by James Dalgleish)