FOREX-Dollar rises on oil drop, housing bill

* Dollar touches 2-week high vs euro, 1-month high vs yen

* Oil price slump supports dollar

* U.S. housing bill improves confidence in financials (Recasts; adds comments, changes byline)

By Vivianne Rodrigues

NEW YORK, July 23 (Reuters) - The dollar rallied to a one-month peak against the yen and a two-week high against the euro on Wednesday, supported by a further drop in oil prices and improved confidence in the U.S. financial sector.

Oil prices, which are trading more than $20 below this month's record peak CLc1 of $147.27, continued their decline on Wednesday following the release of U.S. crude inventory data, giving the greenback a generally bid tone.

At the same time, the U.S. House of Representatives prepared to vote on a measure that is expected to help the housing sector recover from its worst downturn since the Great Depression. The White House said President George W. Bush will sign the bill into law.

"U.S. equities, oil prices and a little bit of hangover from yesterday's hawkish Fed speak have kept the dollar supported so far on Wednesday," said Ronald Simpson, managing director of global currency analysis at Action Economics in Tampa, Florida.

"Congress is planning on passing this housing bill today, and the president said he was going to sign it," he added. "While it's not a fix to the problem, it certainly is going to allay some fears, at least for the short term."