FOREX-Dollar gains; solid U.S. economic reports bolster Fed
* Dollar gains after string of strong U.S. economic data
* Fed officials play down chances of imminent stimulus withdrawal
NEW YORK, June 25 (Reuters) - The dollar recovered from early losses and rallied against the euro and yen on Tuesday after a slew of U.S. economic reports bolstered optimism the recovery was gaining traction and that the Federal Reserve can slow its stimulus measures.
Durable good orders increased by a better-than-expected 3.6 percent in May as demand for goods ranging from aircraft to machinery rose, the Commerce Department said on Tuesday. Orders for these goods, which range from toasters to aircraft, had increased by a revised 3.6 percent in April.
Separate data showed prices of U.S. single-family homes jumped in April to rack up their biggest annual gain in seven years, adding to optimism around the dollar.
A second report on housing indicated sales of new U.S. single-family homes rose to their highest in nearly five years in May, confirming the housing market's strengthening tone. .
And in the final first-tier data report released on Tuesday. U.S. consumer confidence jumped in June to its highest in over five years.
The data aligns "with the Federal Reserve's assessment that the U.S. economy is improving modestly, and specifically over the past two weeks, U.S. economic data has by and large beaten consensus forecasts," said Christopher Vecchio, currency analyst at DailyFX in New York. "The data leaves the U.S. dollar on a strong fundamental footing."
The dollar index, which measures the dollar against a basket of six other major currencies, rose 0.3 percent to 82.692 for its fifth straight day of gains and remained near Monday's near three-week peak of 82.841.
The dollar was up 0.1 percent at 97.78 yen, off Monday's two-week high of 98.70 but still higher on the day.
The euro surrendered early gains and was last down 0.4 percent at $1.3069, though it held Monday's low of $1.3058, its weakest level since June 5.
Earlier the dollar index fell for the first time in a week on the back of Monday's comments from Minneapolis Fed President Narayana Kocherlakota and Dallas Fed head Richard Fisher who both reassured investors who were fearing the impact of the Fed eventually tapering its monthly $85 billion bond-buying program.
"The dollar has been trading on Fed speculation for the last two weeks," said John Doyle, currency strategist at Tempus Inc in Washington. "Yesterday, comments from two Fed officials were more dovish than Bernanke but attention has now shifted to durable goods which were good for the 'tapering sooner' argument."
Still, despite the good data, investors also cautioned that the dollar's rally may be too far, too fast. With recent gains the dollar index is up 3.6 percent for the year to date, with a 12.7 percent rise against the yen alone.
"Whatever dollar rally we have today will be limited in scope," said Boris Schlossberg, managing director of foreign exchange strategy at BK Asset Management in New York. "We have had a good run and the market will focus on nonfarm payrolls (reports) going forward."
Schlossberg added that investors will also want to see the housing market recovery continue in the face of higher mortgage interest rates as yields rise.
The IMF's chief economist, Olivier Blanchard, said on Tuesday that Fed talk of exiting its stimulus could spur volatility on global markets, adding recent movements had been exaggerated.
Volatility has jumped due to turmoil in Chinese markets, which have been roiled by concerns about a potential money market squeeze. In an attempt to calm nerves, China's central bank said it would guide markets to reasonable rates.
Some $4.4 billion in euros changed hands globally on Tuesday, using Reuters Dealing data, while $2.39 billion in yen traded.