May 23 (Bloomberg) -- The dollar traded near a seven-month high against the euro in London on expectations reports this week will show the U.S. economy grew faster last quarter than first estimated and durable goods orders rebounded in April.

The pace of U.S. economic expansion and speculation the Federal Reserve will keep raising interest rates have helped push the dollar up against 12 of its 16 major counterparts this year. The euro may also lose support after a poll yesterday showed a majority of French voters will reject the European Union constitution in a referendum on May 29.

``The U.S. dollar is powering ahead,'' said David Mozina, a currency strategist in Sydney at ABN Amro Holding NV. ``The Fed is the only major bank in the midst of a tightening cycle, and the growth divergence is apparent between the U.S. and other major economies.''

Against the euro, the dollar was at $1.2559 at 7:09 a.m. in London, from $1.2557 late on May 20 in New York, according to electronic foreign-exchange dealing system EBS. It traded as high as $1.2536 per euro on May 20, the strongest since Nov. 20. The U.S. currency was also at 107.98 yen, from 108.16, and was earlier at a five-week high of 108.30. It may rise to $1.24 per euro in the next week, Mozina said.

Fifty-nine percent of the 54 strategists, investors and traders polled on May 20 from Sydney to New York advised buying the dollar against the euro. Thirty-seven percent said the dollar will rise versus the yen.

U.S., German Economies

Durable goods orders rose 1.3 percent last month, after falling 2.8 percent in March, based on the median estimate of 51 economists surveyed by Bloomberg News. The Commerce Department will release the report on May 25.

The U.S. economy probably expanded at a 3.6 percent annual rate from January through March, faster than the 3.1 percent pace reported last month, according to a different poll ahead of the department's May 26 release.

By contrast, the ZEW Center for European Economic Research may say tomorrow that its index of German investor sentiment held near the weakest in four months, while German business confidence probably was near a 19-month low in May, the Ifo institute will say on May 25, separate surveys indicated.

``Things have improved for the U.S. dollar,'' said Stephen Walters, chief economist in Sydney at JPMorgan Chase & Co. This week's U.S. growth report ``is going to be very positive.''

The Fed has increased rates eight straight times in the past year, bringing its benchmark to 3 percent, above the European Central Bank's comparable target of 2 percent. The Bank of Japan on May 20 left borrowing costs at virtually zero. The Fed tomorrow will release the minutes of its May 3 meeting.

`We Are Long'

``The Fed will continue to tighten this year,'' said March Faber, managing director of Marc Faber Ltd., with about $300 million of assets. ``We are now long U.S. dollars.''

The dollar is up 7.9 percent against the euro and 5.3 percent against the yen this year, which may prompt some investors to bet the gains are excessive.

A technical chart suggested the dollar's rally may wane. The U.S. currency's 14-day relative strength index against the euro was 30.80. The index is a gauge of momentum in a given period, and a level above 70 or below 30 signals a change in direction. Against the yen, the dollar's RSI was 62.94.

``The risks are moving against the dollar,'' said Ashley Davies, a currency strategist in Singapore at UBS AG. ``The dollar has overextended itself.''

Support for the euro is waning amid concern voters will reject the EU constitution in votes in France on May 29 and in the Netherlands on June 1. Opposition in France is at 53 percent, according to a May 20 survey by polling company BVA. Twice as many Dutch say they will reject as those who will support it, a poll by TNS NIPO showed the same day.

A Merrill Lynch & Co. survey published May 17 showed 71 percent of fund managers predict a defeat would weaken the euro.

``A no vote in France would really hurt the euro,'' said Toru Umemoto, chief currency strategist in Tokyo at Barclays Plc. ``It would weigh on the euro for years to come.''

The euro may fall to $1.24 this week, he said.

To contact the reporter on this story: John Brinsley in Tokyo at jbrinsley@bloomberg.net.

Last Updated: May 23, 2005 02:11 EDT