* Dollar turns higher as U.S. consumer confidence falls
* Euro falls to 2-week lows, dollar index at 2-week highs
* Markets look to U.S. GDP data, Norges Bank decision
* Risk sentiment still high despite confidence setback
(Updates prices, adds comment)
By Gertrude Chavez-Dreyfuss
NEW YORK, Oct 27 (Reuters) - The dollar climbed to two-week
highs against the euro on Tuesday in choppy trading, as
investors sought shelter in the greenback after data showed
U.S. consumer confidence worsened in October, suggesting a
global recovery could stall.
A soft confidence report bodes ill for U.S. growth because
it indicates lower consumer spending, a factor that drives
roughly 70 percent of the economy. That is good news for the
safe-haven dollar, but could pressure riskier assets such as
stocks and commodities and higher-yielding currencies such as
the Australian dollar.
The Conference Board's U.S. consumer confidence index fell
to 47.7 this month from 53.4 in September, its weakest since
July and well below forecasts for a reading of 53.1. For story,
see []
"The consumer data suggests a global recovery isn't as
entrenched as we thought it was," said Greg Salvaggio, senior
vice president of capital markets at Tempus Consulting in
Washington.
In midday trading, the euro fell to $1.4787 <EUR=EBS>, its
lowest since Oct. 13. It last traded at $1.4815, down 0.3
percent and well below Monday's high of $1.5064, its highest
since August 2008.
Against the yen, the euro fell 0.5 percent to 136.43
<EURJPY=EBS>, pulling back from more than two-month highs hit
on Monday near 138.49 yen.
"We're of the mindset that the euro is a bit overextended.
Every single player in the market is long euros and we're
seeing a correction now," Salvaggio said.
The ICE Futures dollar index <.DXY>, a measure of its
performance against six other major currencies, rose to
76.323, a two-week high, well above a 14-month low of 74.94 hit
last week. The index was last up 0.2 percent at 76.233.
The dollar gained 0.4 percent against the Swiss franc to
1.0225 francs <CHF=>, and was up against the New Zealand
dollar, which fell 0.4 percent to US$0.7447 <NZD=>.
Just like Monday, it was a complete turnaround for the U.S.
dollar, which traded lower in Europe as investors took profits
on the greenback's gains from the previous session.
One of the reasons for the dollar's resilience is a heavy
short position on the currency accumulated the last few weeks,
a sign that the greenback could rally soon. [].
In addition, recent U.S. economic figures, such as the
University of Michigan consumer confidence report and the
weekly jobless claims, have not met the market's expectations,
raising doubts about the health of the U.S. economy.
"The market is beginning to realize that the recovery
scenario priced into the current levels of risk assets may be
overly optimistic," said Boris Schlossberg, director of FX
research at GFT in New York.
He added that Wednesday's U.S. durable goods data will be
the "next critical test of the economy's health" and could well
determine if the pullback in risk assets could be sustained for
the rest of the week.
Still, most traders are still in a risk-seeking mentality,
which could mean that the current weak dollar trend could
reemerge.
They cited Thursday's first estimate for third-quarter U.S.
gross domestic product, with analysts predicting 3.3 percent
growth. That would follow strong growth rates in some euro zone
countries, China and Japan.
Market participants also point to Wednesday's decision from
Norway, where the Norges Bank is seen raising interest rates
for the first time since the global crisis hit less than two
years ago.
"The market is looking at that as a sign that a global
recovery is underway," which could prompt investors to go back
into risky assets, said Amelia Bourdeau, senior currency
strategist, at UBS in Stamford, Connecticut.
