NEWYORK, Feb. 1 -- The dollar traded near a seven-month high against the euro as signs the world's largest economy is gaining momentum boosted demand for U.S. assets.

The greenback may advance before reports this week forecast to show U.S. manufacturing expanded for a sixth-straight month and household purchases rose. The euro touched a nine-month low versus the yen on concern Greece's budget problems will spread.

"The incoming data will underscore that the U.S. economy is on the mend," said Koji Takeuchi, senior economist in Tokyo at Mizuho Research Institute Ltd., a unit of Japan's second- largest banking group. "Improving economic fundamentals will support the dollar."

The U.S. currency was at $1.3884 per euro at 9:26 a.m. in Tokyo from $1.3863 in New York on Jan. 29, after earlier touching $1.3853, the strongest level since July 8. The dollar was at 90.22 yen from 90.27 in New York. The euro stood at 125.24 yen from 125.13 yen after earlier touching 124.43, the weakest level since April 28.

The Institute for Supply Management's factory index came in at 55.5 in January, according to a Bloomberg News survey of economists before the release of the data today by the Tempe, Arizona-based group. Readings greater than 50 signal expansion.

U.S. household purchases rose 0.3 percent after climbing 0.5 percent in November, according to a separate survey ahead of the data's release today.

GDP Gains

The dollar strengthened last week as the Commerce Department reported that U.S. gross domestic product increased at a 5.7 percent annual pace from October through December, the fastest in six years. The median forecast of 84 economists in a Bloomberg News survey was for a 4.7 percent advance.

Futures traders increased bets to the highest level in more than a year that Europe's single currency will decline against the greenback, data from the Washington-based Commodity Futures Trading Commission showed.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 39,539 on Jan. 26, the largest short position since September 2008, compared with net shorts of 25,282 a week earlier.

The euro fell 2 percent against the dollar last week, the biggest weekly loss since April 2009, on concern that fiscal deficits in the 16-nation euro region will worsen, diminishing the appeal of the European currency.

The euro also fell 6.1 percent versus the yen in January in its sharpest monthly drop since a 9.1 percent slide in January 2009.

Greece Woes

Greece's bonds tumbled last month on concern the country can't reduce its budget deficit without outside help. The bonds were the world's worst performers in January, losing 6 percent, Bloomberg/EFFAS indexes show. The European Commission said last week it expects to give an assessment of Greece's budget plan on Feb. 3. European Union Monetary Affairs Commissioner Joaquin Almunia said on Jan. 29 fiscal imbalances within euro-zone economies has been discussed "every month."

"Sovereign debt worries in Greece, Portugal and Spain continue to hang over the euro," said Mike Jones, a currency strategist at Bank of New Zealand Ltd. in Wellington. "As long as these worries continue, we are likely to see ongoing ‘safe- haven' support for the dollar and the yen."

The yen typically strengthens in times of financial turmoil as Japan's trade surplus makes the currency attractive as it means the nation does not have to rely on overseas lenders. The dollar benefits as the world's main reserve currency.