* Month-end fixing demand initially boosts euro
* Euro on track for biggest monthly fall since Jan 2009
* US consumer spending flat, dims risk appetite
(Updates prices, adds quote)
By Gertrude Chavez-Dreyfuss
NEW YORK, May 28 (Reuters) - The euro drifted lower against
the dollar in a choppy session on Friday as
weaker-than-expected U.S. economic data tempered risk appetite,
weighing on stocks and triggering modest selling of the single
currency after early gains.
U.S. data showing consumer spending was unexpectedly flat
in April, its weakest reading since September, weighed on the
euro after stocks fell. [].
In recent weeks, the euro has become a proxy for risk
appetite in the currency market amid the euro zone's debt
crisis, rising and falling in tandem with global stocks.
"U.S. data today is not really that good for risk trades,"
said Vassili Serebriakov, senior currency strategist at Wells
Fargo in New York. "So we have seen equities lower and some
mild selling in the euro and also in the Aussie dollar, another
pro-risk currency."
In midday New York trading, the euro was down 0.1 percent
against the dollar at $1.2354 <EUR=> after rising to $1.2452.
The euro started declining after the U.S. personal
consumption and spending report, with investors trying to make
a run at stops in the $1.2330 area. There was some German
buying interest in the euro early in the New York session, but
a trader said that could reverse if the single currency breaks
below $1.2330.
A separate report showing business activity in the U.S.
Midwest grew more slowly than expected in May initially boosted
the euro, but the currency later fell as investors grew
cautious of risk trades. For the data, see [].
Against the yen, the euro <EURJPY=R> fell 0.2 percent to
112.35.
The dollar <JPY=> slipped 0.2 percent to 90.89 yen, while
the dollar index <.DXY>, which measures the greenback's
performance against a basket of currencies, was up at 86.341.
Earlier in global trading, the euro was higher against the
dollar, boosted by month-end demand as investors square up
positions for May, a period that featured massive selling of
the single currency due to the debt crisis in the region.
The euro fell about 12 cents against the dollar in the
month to hit a 4-year low of $1.2143. It was on track for a
hefty 7.1 percent monthly decline, which would be the biggest
drop since January 2009. It would also be the sixth straight
monthly fall.
Losses came despite a $1 trillion safety net set up by
European officials earlier this month to ward off the adverse
effects from Greece's debt problems and the announcements of
new austerity measures from Spain and Portugal.
Analysts said a key support level is $1.2135, the 50
percent Fibonacci retracement of the 2000-08 advance, just
above the recent four-year low of $1.2143. Charts further show
a monthly close below $1.2135 would favor more weakness, with
analysts seeing the next downside support at $1.1640, a low hit
in November 2005.
While market turmoil has calmed, concerns about the euro
zone remain entrenched.
Shaun Osborne, chief currency strategist at TD Securities
in Toronto, cited a heavy auction schedule in the euro zone and
some lumpy government bond redemptions over the next few
months, which could turn the market's focus to Italy.
"While Italy may not be a structurally vulnerable as Greece
or Portugal, the relative underperformance of Italian credit
default swaps this month suggests that investor concerns may be
rotating away from Greece," Osborne said.
(Editing by Chizu Nomiyama)
