* Euro touches 7-week high; dollar index hits 7-week low
* US data disappoints, shows large outflows from US assets
* Fed minutes coming up later on Wednesday
By Wayne Cole and Masayuki Kitano
SYDNEY/SINGAPORE, Feb 19 (Reuters) - The euro touched a seven-week high against the dollar on Wednesday, with the greenback struggling in the wake of more soft economic data and news that foreign investors had been heavy sellers of U.S. assets.
The euro held steady at $1.3761, having touched a high near $1.3773 earlier on Wednesday, its strongest level in about seven weeks.
Tuesday's disappointing data on New York manufacturing and U.S. housing added to the case for the Federal Reserve to be patient in its tapering plans and pushed Treasury yields lower, so undermining the dollar's yield advantage.
Against a basket of major currencies, the dollar set a seven-week trough at 79.932, and last stood at 79.985.
Perhaps even more telling for the long run, figures from Treasury showed overseas investors sold almost $120 billion of U.S. assets in December.
Alan Ruskin, global head of G10 currency strategy at Deutsche Bank in New York, noted that the net outflow from U.S. equities over 2013 has amounted to a huge $214 billion.
In contrast, the euro zone attracted inflows into stocks of 111 billion euros. At the same time, the euro zone enjoyed a record current account surplus of 216 billion euros in 2013, while the United States ran up a deficit of almost $400 billion.
"That the euro was the strongest major currency in 2013 is easily - with all the benefit of hindsight - explained by this current account and equity flow gap," Ruskin said.
"For USD strength to broaden and also encompass the euro, a turn in the 'equity gap' is one precondition."
Still, some market players said the euro could face resistance at levels around $1.38 in the near term.
Aside from a brief spike in late December to $1.3894, a rise that occurred in thin year-end trading, the euro has mostly traded roughly between $1.35 to $1.38 since December.
"Our view is that we'll see renewed weakness in the euro on better data out of the U.S. relative to Europe going forward," Callum Henderson, global head of FX research for Standard Chartered Bank in Singapore.
"I think it's fair to say that the $1.37-$1.38 area should be the top for now," he added.
Against the yen, the euro eased 0.1 percent to about 140.74 yen. The euro had climbed 0.8 percent versus the yen on Tuesday, helped in part by the Bank of Japan's decision to extend and expand a scheme to promote bank lending.
The move was taken as a sign that the central bank was open to further easing steps, which many expect will be needed once an increase in Japan's sales tax is enacted in April.
The dollar eased 0.1 percent to 102.26 yen, having slipped back from a peak near 102.74 yen set on Tuesday.
Later on Wednesday, the Fed will release minutes of its January policy meeting when it decided to trim its asset buying by another $10 billion.
Fed Chair Janet Yellen has since indicated that the tapering will continue, as long as the U.S. economy improves as expected, and the minutes are likely to reflect that outlook.
Dealers are also keeping a close eye on China's central bank after it drained funds from the money market on Tuesday.
The People's Bank of China (PBOC) is trying to engineer a gradual upward shift in the cost of money to encourage companies to deleverage and discourage high-risk shadow banking activity.
Investors are anxious in case the tightening goes too far and hurts economic growth, concerns that have periodically put pressure on currencies across the Asian region.
On Wednesday, China's seven-day repo rate opened at 3.76 percent versus 5.00 percent at the previous close.