LONDON - THE dollar dipped against the euro on Tuesday despite better-than-expected housing data in the United States and as German investor confidence proved to be surprisingly robust in December.

The single European currency in late-day trade was at US$1.2987 (S$1.94), up from US$1.2952 late on Monday in New York.

The dollar also fell against the yen, trading at 92.59 yen (S$1.51) against 92.77 on Monday.

The US currency was unable to take advantage of a better-than-expected US housing report.

The National Association of Realtors reported pending home sales declined 0.7 per cent in October after a sharp 4.3 per cent fall in September. Analysts had foreseen an October decline of 3.0 per cent.

The overall level for October was 1.0 per cent below the prior-year period, 'which is a hopeful sign of stabilisation for the distressed housing market,' Briefing.com said in a report.

In Europe market sentiment was boosted by news that German investors had been surprisingly less gloomy for a second month running, even though the country is in a recession that analysts warn is nowhere near an end.

The ZEW survey of investor confidence showed a surprise gain for December of 8.3 points to minus 45.2 points, compared with a forecast fall to minus 55.

It was the second straight month that investor confidence was stronger than expected.

Mannheim-based ZEW said the improvement 'signals that the worries about a further aggravation of the recession in the middle of 2009 seem to be limited.'

'The interest rate cuts of central banks worldwide and the economic rescue packages should bolster the economic development,' it added.

Added Ms Jennifer McKeown of Capital Economics: 'The latest German data have brought some respite from the recent run of terrible news .... Unfortunately, though, the economy still looks set to deteriorate more sharply than is currently anticipated next year.'

At Calyon bank analyst Stuart Bennett said the dollar was in a peculiar position at the moment.

He noted that prospects for robust US government action against recession embolden investors, who traditionally flock to the dollar in times of stress, and encourages them to take risks and to seek out other currencies, such as the euro.

'For the time being the US dollar appears to be in an uncomfortable sandwich,' he said.

'If the data surprises to the downside, concerns over the US outlook mount, and the greenback comes under pressure.

'The prospect of a further deterioration in activity however adds weight to the belief that US policymakers will do whatever it takes to reflate the economy.

The hope that tomorrow will be brighter is allowing risk aversion to ease, which is also putting the dollar on the defensive.'

The pound sterling meanwhile fell to an all-time low against the single currency, 1.1416 euros (S$2.21), as investors reacted negatively to a decline in British industrial production that heralded a deep recession.

In London trade on Tuesday, the euro changed hands at US$1.2987 against US$1.2952 late on Monday, 119.36 yen, 0.8721 pounds (S$1.94) and 1.5615 Swiss francs (S$1.95).

The dollar stood at 92.59 yen and 1.2111 Swiss francs.

The pound was at 1.4786 dollars.

On the London Bullion Market, the price of gold edged up to US$767.75 an ounce from US$767.25 late on Monday. -- AFP