* Dollar, yen rally after U.S. July consumer data
* Dollar rebounds from 2009 trough vs basket of currencies
* U.S. consumer confidence fell more than expected to 46.6
* Aussie dollar gains on rate hike expectations
(Adds comments, updates prices, adds detail)
By Wanfeng Zhou
NEW YORK, July 28 (Reuters) - The dollar rebounded on
Tuesday from its lowest level this year against a basket of
currencies as a drop in U.S. consumer confidence fueled worries
about the economy, enhancing the greenback's safe-haven
appeal.
The weaker-than-expected U.S. data added to pessimism
already in the financial markets sparked by disappointing
quarterly results from a handful of major companies such as
Office Depot Inc <ODP.N>.
That weighed heavily on stock and oil prices and dragged
down the Australian dollar from its highest level against the
U.S. currency since last September. The yen rallied across the
board as investors dumped riskier assets.
"Consumers are feeling no love in this recovery," said
Boris Schlossberg, director of currency research at GFT Forex
in New York. "All this suggests is that the critical assumption
by the recovery bulls that consumption will come back as the
recovery takes hold is faulty."
The ICE Futures U.S. dollar index, which measures the
performance of the greenback against a basket of currencies,
rose 0.4 percent to 78.964 <.DXY>. It had earlier fallen to a
low of 78.315, its lowest since December.
The euro <EUR=> fell 0.7 percent to $1.4152, having earlier
climbed as high as $1.4303, its highest since early June,
according to Reuters data.
The dollar had come under pressure in recent weeks as
largely positive economic data and U.S. corporate earnings
results stoked expectations that the global economy was on the
mend.
"We've had a nearly two-week run-up in stocks and a flight
into riskier currencies. Markets are kind of technically
overbought in terms of risk and due for a bounce," said David
Gilmore, a partner at Foreign Exchange Analytics in Essex,
Connecticut. "We probably overshot in terms of expectations
about the economy."
CONSUMER CONFIDENCE
The dollar fell 1.1 percent to 94.17 yen <JPY=>, while the
euro dropped 1.7 percent to 133.30 yen <EURJPY=R>.
U.S. consumer confidence fell more than expected to 46.6 in
July, Conference Board data showed, recording its second
consecutive decline as sentiment remained hampered by a
difficult job market. For more, see [].
"We've seen some rolling over in the euro/dollar with some
people returning to dollars because consumer confidence was a
bit disappointing," said Brian Kim, currency strategist at UBS
in Stamford, Connecticut.
"Fundamentally, there's cause for concern even though some
of the data has been better. And if markets stumble, people
will go back to the dollar and yen."
Traders awaited the outcome of a sale of $42 billion of
two-year U.S. government paper later in the day. A record $115
billion in new debt is being auctioned this week, including $96
billion in new coupon securities.
The Australian dollar earlier rallied to a high of
US$0.8338 <AUD=> after Australia's central bank governor fueled
speculation interest rates may rise soon. The Aussie dollar
also hit a seven-week high against the yen <AUDJPY=R>.
Reserve Bank of Australia Governor Glenn Stevens said risks
to the economy were now more balanced and that low interest
rates could inflate a housing bubble, the clearest sign yet
that it was likely done with easing policy. []
"This ... reinforces the view that the RBA is likely to be the
first G10 central bank to hike," analysts at CitiFX wrote in a
research note.
