By Lisa Twaronite and Shinichi Saoshiro
TOKYO (Reuters) - The dollar hit a two-month peak against its basket of peer currencies on Wednesday, boosted by robust U.S. housing data supporting the case for the Federal Reserve to raise interest rates in the near term, but fell back slightly.
The dollar index inched 0.1 percent lower to 95.503 (DXY), after earlier rising as high as 95.661, one tick above the overnight high hit after data showed new U.S. single-family home sales surged to a more than eight-year peak in April and prices hit a record high.
While some short-covering emerged after the greenback's gains, many investors took a breather ahead of data and events in coming days, market participants said.
"People are taking a low profile today. Most people are just squaring positions ahead of the month-end," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo. "The dollar's downside should be limited for now," he added.
The upbeat housing numbers backed the Fed's April policy meeting minutes, released last week, which hinted that the central bank may raise rates soon if the economy appeared strong enough.
The euro added 0.1 percent to $1.1153
The dollar inched down 0.1 percent to 109.93 yen
"The dollar may need further incentives to challenge recent highs and climb yet higher. These fresh incentives could come in the form of more data due later this week, and Japan's stance on fiscal stimulus, which would in turn boost the Nikkei and improve risk appetite," said Shin Kadota, chief Japan FX strategist at Barclays (LON:BARC) in Tokyo.
The dollar could take its cues over the next few days from data including U.S. initial jobless claims and pending home sales on Thursday, and Japanese inflation and U.S. first quarter GDP figures on Friday.
Fed Chair Janet Yellen is also due to speak on Friday, which is also the concluding day for the G7 summit being held in Japan.
Once the G7 summit is out of the way, markets will be focusing on whether Tokyo may be looking to postpone a scheduled sales tax hike and implement fiscal stimulus measures.
Elsewhere, "Brexit" themes continued to sway the pound, which soared overnight when the latest poll showed strong support for Britain to remain in the European Union.
Sterling slipped 0.2 percent to $1.4614
The Australian dollar added 0.3 percent to $0.7205
The Aussie was hit when the market took comments by Reserve Bank of Australia Governor Glenn Stevens to mean the central bank could further ease monetary policy in coming months.
Surprisingly low inflation prompted the RBA to cut the cash rate to a record low 1.75 percent earlier this month and has investors betting on at least another easing this year.