* Orders for U.S. durable goods in November surged but home sales slip
* Rise in U.S. Treasury note yields supports dollar
* Thin year-end conditions keeping moves slight
* Quiet trade before Christmas Day holiday when most global markets are shut
By Julie Haviv
NEW YORK, Dec 24 The dollar rose on Tuesday in illiquid pre-holiday trade as increasing evidence of a solid recovery in the United States reinforced convictions the Federal Reserve will continue to step away from its bond buying stimulus.
In the very near term, the market will likely struggle to find fresh stimulus ahead of year-end holidays. Most financial markets will be shut on Wednesday for the Christmas Day holiday and many will stay closed on Thursday.
U.S. stocks were little changed ahead of an early close while European stocks edged up, adding to the best run-in to Christmas since 1999, although trading in the shortened session was thin.
On the U.S. economic front, orders for long-lasting U.S. manufactured goods surged in November and a gauge of planned business spending on capital goods recorded its largest increase in nearly a year, pointing to sustained strength in the economy.
While another report showed new home sales slipped in November, sales in October were revised to show the highest pace in more than five years. In addition, house prices rebounded, underscoring the economy's improving fundamentals.
"While the November reading missed estimates, the revision to October data puts the new homes market on a very solid foundation," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co. in New York.
"Both median and average prices rose," he said.
The data helped to push U.S. Treasury note yields higher, buoying the appeal of the dollar.
"The U.S. data was robust enough to keep the dollar supported to year end, and to convince investors that the Federal Reserve will continue to taper," said Michael Sneyd, FX strategist at BNP Paribas.
He was referring to the Federal Reserve's scaling back its monthly asset purchases in its quantitative easing program.
The durable goods data followed upbeat reports released the previous day showing consumer spending rose in November at the fastest pace since June. A survey also showed consumer sentiment hitting a five-month high heading into the end of the year.
In late morning New York trade, the euro was down 0.2 percent at $1.3664. Against the yen, the common currency flat at 142.58, but not far from a five-year high of 142.90 set last week.
The dollar gained 0.2 percent to 104.34 yen, not far off a five-year high of 104.63 touched on Friday.
Although the Fed has gone to a great length to tell markets that tapering of its bond buying does not automatically lead to rate hikes, that has not stopped investors from speculating on the Fed's eventual exit from a zero interest rate policy.
Markets are also now looking to see if the U.S. economy will be strong enough to allow the Fed to continue withdrawing support through 2014.
Meanwhile, worries about a cash crunch in China appeared to have taken a back seat after the central bank last week injected 300 billion yuan ($49.41 billion) into the money market.
Traders, however, will no doubt be keeping a close eye on any fresh developments there in the year-end lull.