| NEW YORK
NEW YORK The dollar recovered ground late on Monday on rising U.S. Treasury yields that increased the greenback's advantage over the euro, pushing it back down to a 2-1/2 year low in thin pre-holiday trade.
"We think the yields are the story here for the dollar. The two-year Treasury auction of just over 70 basis points is the highest since mid-2011, and that's widening the dollar's front-end yield advantage and driving it higher," said Vassili Serebriakov, currency strategist at BNP Paribas in New York.
The euro slipped past Friday's 2-1/2 year low to reach a new trough at $1.2216 EUR=, a small loss for the day. Earlier in the day the euro benefited from some profit-taking on short-euro positions.
The dollar was hit earlier in the trading session after the weakest existing U.S. home sales data in six months.
A data-heavy Tuesday is expected to bring the last gasp of trading before the Christmas and New Year's holidays. Tuesday's data includes U.S. November durable goods orders, final third-quarter GDP, home prices and inflation data. ECONUS
The divergence in monetary policies between the U.S. Federal Reserves, which is on track to tighten policy next year, and the European Central Bank, which is positioning itself for looser policy, has put the euro on track for weakness in 2015.
ECB policymaker Luc Coene was the latest to point the way toward outright buying of government bonds to stimulate a still-moribund euro zone economy.
"We're at levels where from a long-term valuation perspective, the euro is weak, but here we have ECB officials saying they will ease further and the Fed headed the other way," said Jane Foley, a strategist with Rabobank in London.
There are some concerns for the euro related to Greece's presidential election and the potential for a renewed threat of Greece defaulting or even exiting the euro zone.
Greek Prime Minister Antonis Samaras, whose party is trailing the anti-bailout Syriza Party in opinion polls, may struggle to avoid a snap election in two remaining rounds of voting for his candidate for president, planned on Dec. 23 and Dec. 29.
The dollar held near a two-week high of 120.08 yen JPY=, up 0.45 percent on the day. Sterling fell 0.25 percent to $1.5629 and traded at 78.45 pence versus the euro, a loss of about 0.27 percent. GBP=EURGBP=.
(Additional reporting by Patrick Graham in London; Editing by Meredith Mazzilli and Dan Grebler)