* Dollar falls against euro for third week
* Dollar index gains over week
* Fed likely to taper despite G20 meeting
By Sam Forgione
NEW YORK, Feb 21 (Reuters) - The dollar fell against the euro on Friday after weak U.S. housing data stoked concerns about the American economy, but notched its first week of broad gains against a basket of major currencies in three weeks.
The greenback also rose to to a three-week high versus the yen.
The National Association of Realtors said that home sales dropped 5.1 percent to an annual rate of 4.62 million units in January, an 18-month low. The data added to recent weak U.S. economic data on retail sales and homebuilder confidence.
"Today's housing data supports the idea of weaker growth," said John Rutledge, chief investment strategist at Safanad, a New York-based private investment firm.
The euro hit a high of $1.3759 against the dollar and was last trading up 0.2 percent at $1.3746, marking the dollar's third weekly loss versus the euro.
An EU-mediated peace deal between opposition leaders in Ukraine and President Viktor Yanukovich on Friday also supported the euro's gains against the dollar by removing a source of risk for European trade, Rutledge of Safanad said.
At least 77 people have been killed this week in the worst violence since Ukraine emerged from the wreckage of the Soviet Union in 1991.
The dollar was also down 0.27 percent on the day against the Swiss franc at 0.8871.
The dollar was down slightly against a basket of major currencies at 80.241. The dollar index has regained some footing after touching a trough of 79.927 on Wednesday, its lowest level since late December.
Despite its slight decline on the day, the dollar index posted its first weekly gain in three weeks, largely on minutes from the U.S. Federal Reserve's January policy meeting released Wednesday showing that the U.S. central bank's plan to reduce its monthly asset purchases remained intact.
Traders had feared that the Fed could slow the pace of its reduction in monthly asset purchases after weak U.S. economic data on hiring, retail sales, and housing.
The minutes showed several policymakers wanted to emphasize that their bond-buying program would be trimmed in predictable, $10 billion steps unless the economy's performance surprises them.
"Even with the soft U.S. economic data, it's unlikely that we'll see the Fed's taper trajectory change," said Scott Smith, senior corporate foreign exchange trader at Cambridge Mercantile Group in Calgary, Canada.
Against the yen, the dollar edged up 0.29 percent to 102.565 yen, moving away from Thursday's intraday low of 101.67 yen. It hit a peak of 102.83 yen, its strongest level since late January. A jump in the Nikkei index weighed on the safe-haven yen and gave the dollar an additional boost.
The Fed's path of cutting its bond-buying program and the Bank of Japan's decision to extend three special loan facilities by one year on Tuesday have strengthened the dollar against the yen, said Rutledge of Safanad.
"Japan still has the fire hose turned on for quantitative easing, while the Fed is shutting off," he said. The BOJ's extension of the programs, done in an effort to buoy economic growth, signaled the country's resolve to maintain its expansionary monetary policy.
Traders are watching for developments from this weekend's Group of 20 meeting of finance ministers and central bank chiefs in Sydney, where global growth and recent turmoil in emerging markets are expected to be in focus.
Emerging market officials are pushing for a discussion of the impact of the Fed's stimulus withdrawal on their economies, a top Russian central banker said on Friday.
But the Fed's focus is likely to remain on U.S. economic conditions rather than the implications of tapering on emerging markets, analysts said.
"The Fed will not be moved from its path based on what is discussed at this meeting," said Lane Newman, director of foreign exchange at ING Capital Markets in New York.