* Persistent worries about Greece weigh on euro
* Fed minutes show greater appetite for asset sales (Updates prices)
NEW YORK, Feb 17 (Reuters) - The dollar rose to a two-week high against the yen and rallied against the euro on Wednesday, lifted by stronger-than-expected U.S. housing and industrial data and as worries about Greece's fiscal health weighed on the euro.
The single currency failed to sustain early gains against the dollar as traders bet that Tuesday's rally pushed the euro up too far, too fast. Declines in the euro accelerated as reports showed U.S. housing starts rose to a six-month high in January and industrial output rose a solid 0.9 percent. For details, see [ID:nN17114831].
The dollar extended gains against the euro and yen after minutes from the Federal Reserve's January meeting showed policy makers saw a need to begin a program of assets sales in the near future and expect the economic recovery to continue. For details see [ID:nWEQ003794].
"When it comes to economic fundamentals, the U.S. is ahead of most other regions," said Jessica Hoversen, fixed income and currency analyst at MF Global Ltd., in Chicago. "If you combine that with the fact that the situation in Greece is still very far from being reconciled, what you get is support for the dollar."
In late afternoon trading in New York, the dollar was 1.4 percent higher at 91.35 yen <JPY=>, after touching a session high of 91.38 yen, its highest since Jan. 21. It was the biggest one-day jump for the dollar against the yen since December 4, according to Reuters data.
The euro fell to as low as $1.3587 <EUR=>, after trading as high as $1.3779 on Tuesday. It last traded down 1.2 percent at $1.3601, the biggest one-day drop since Feb. 4, at current prices.
The euro fell even after European finance ministers on Tuesday gave Greece a one-month reprieve, until March 16, to show its deficit reduction plan was being rolled out effectively. They set the same deadline for themselves to decide what should happen next. [ID:nLDE61F0XT]
The euro has fallen almost 5 percent against the dollar since the start of the year on concerns about Greece's fiscal health and that of other euro zone peripheral countries. Currency speculators raised net euro short positions to a record high last week.
There's "no indication that the Greek debt crisis has ended," said Michael Woolfolk, a senior currency strategist at BNY Mellon, in New York. "Without a definitive resolution to how the EU intends to bring chronic fiscal deficit offenders back into line, the risk of contagion will likely persist with the dollar remaining the safe-haven of first choice."
Greek Prime Minister George Papandreou said on Wednesday his debt-ridden country was asking for political support from the European Union to fend off speculators, not European taxpayers' money. [ID:nATH005202].
Currency strategists at UBS AG said in a note they believe the euro's better performance in recent days had more to do with positioning adjustments than structural improvements on the currency union's outlook.
Investor focus in the New York afternoon session was on the Fed minutes.
Several Federal Reserve policy makers want to begin selling securities relatively soon as a way to cut back their massive supply of cash to the financial system, the U.S. central bank said on Wednesday.
"Policy makers seem to be agreeing on a number of issues, such as discount window spreads, which is further evidence conditions are normalizing," said Omer Esiner, U.S. market analyst, Travelex Global Business Payments in Washington. "For a markets perspective, this is clearly dollar another dollar positive." (Reporting by Nick Olivari amd Vivianne Rodrigues; Editing by Leslie Adler)