(Recasts to show dollar rise, U.S. data, Draghi comments; changes byline, dateline, previous LONDON)
* Dollar gains ground on euro, yen
* U.S. housing and durable goods reports give modest boost to dollar bulls
* Draghi reinforces expectations of ECB easing next week
By Daniel Bases
NEW YORK, May 27 The euro softened slightly against the dollar and yen on Tuesday after stronger U.S. economic data and uncertainty persisted over possible European Central Bank monetary policy action next month.
The euro steadily lost ground on the greenback as investors in the United States and the Britain returned from long holiday weekends and encountered higher-than-expected U.S. durable goods data that was tempered by revisions to past reports. .
Housing price data in the U.S. rose, but underlying strength was viewed as mixed as prices are rising more slowly on a year-over-year basis, according to the S&P/Case-Shiller Home Prices Indices report.
European Central Bank President Mario Draghi, speaking in Portugal, said the bank was aware of risks from prices remaining too low for too long, but that the ECB had the tools to get inflation back to its 2 percent target again.
"We have a pretty good idea that some sort of action in June is likely, if those inflation forecasts are revised lower, which it looks likely they will be. But they haven't given us the indication of what type of action they will take," said Brian Daingerfield, currency strategist at the Royal Bank of Scotland in Stamford, Connecticut.
The euro zone issues its May flash inflation data on June 3 with the Reuters consensus estimate of economists forecasting a for a 0.70 percent year-on-year increase. The ECB's governing council meets on June 5.
In mid-morning New York trade, the euro fell 0.15 percent to $1.3625, plumbing Monday's three-month low of $1.3614 in holiday-thinned trade. Against the yen, the euro softened 0.14 percent to 138.07.
The dollar index reversed course and gained ground against a basket of currencies to rise 0.03 percent.
"It looks like the dollar is better bid for choice as there really not a lot going on other than commercial interests. It is also getting onto the end of the month and American corporates are doing some buying," said Lane Newman, director of foreign exchange for ING Capital Markets in New York.
"The debate about how the ECB operates and into next week we have U.S. payrolls data. For the ECB, I think anything less than a 10 basis point cut will be seen as a disappointment. Generally speaking I do not favor the euro," Newman said.