FOREX-Euro dips vs dollar, yen as risk aversion rises

                                
 * Euro hits 2-week low vs dollar and yen
                                
 * Europe shares, oil prices stumble, denting risk demand
                                
 * U.S. factory activity surges; consumer worries persist
                                
 * Japan Q2 GDP rises 0.9 pct qtr/qtr
 (Adds comment, U.S. data, updates throughout, changes byline,
changes dateline, previous LONDON)
                                
 By Steven C. Johnson
                                
 NEW YORK, Aug 17 (Reuters) - The euro hit a two-week low
against the dollar and yen on Monday as a slide in oil prices
and global stock markets and doubts about the strength of a
U.S. recovery prompted investors to cut exposure to risk.
                                
 The yen, which usually gains when investors grow nervous,
rallied across the board, while higher-yield, higher-risk
currencies such as the Australian dollar retreated from recent
10-month highs against the U.S. currency.
                                
 Investors looked for temporary safe havens in the dollar
and yen after Hong Kong stocks fell more than 3 percent and oil
prices dropped. That followed Friday's data showing a second
straight monthly decline in U.S. consumer sentiment, stoking
concern about the strength of an anticipated U.S. recovery.
                                
 Figures showing Japan's economy grew in the second quarter
were largely ignored, while the Federal Reserve Empire State
index showing New York state factory activity surged in August
only trimmed some of the dollar's gains against the euro.
[ID:nN17371906]
                                
 "The jump in the index is pretty healthy and it may
contribute to the paring of the massive risk aversion trade
from overnight," said Boris Schlossberg, director of currency
research at GFT Forex in New York. "But the larger theme
continues to be the consumer and he is missing in action."
                                
 The euro was last down about 0.9 percent at $1.4075 <EUR=>,
just above a two-week low. It was down 1.1 percent at 133.20
yen <EURJPY=> while the dollar fell 0.4 percent to 94.63 yen
<JPY=>.
                                
 Sterling hit a one-month low and was last down 1.1 percent
at $1.6322 <GBP=> while the Australian <AUD=> and New Zealand
dollars <NZD=> each lost 2 percent against the greenback.
                                
 Investors have started to worry that markets have grown too
optimistic about the near-term recovery prospects, analysts
said.
                                
 "The rebound in the S&P has been its fastest in the
post-war (period)," said Rob Minikin, senior currency
strategist at Standard Chartered in London, "and so people are
getting nervous that things have come too far, too fast."
                                
 European shares <.FTEU3> and U.S. stock futures <SPc1> both
fell around 2 percent on the day, while oil prices fell to a
two-week low.
                                
Some analysts said coupon payments on U.S. Treasuries worth
$20-25 billion on Monday were helping to put selling pressure
on dollar against the yen.
                                
 Data showing Japan's economy grew for the first time in
five quarters in the April-June period did little to improve
sentiment, even as government stimulus spending helped the
economy expanded 0.9 percent in the quarter, ending its longest
recession in decades. [ID:nT212505]
                                
 But analysts said the road to sustainable recovery in Japan
will be a long one.
                                
 U.S. Treasury data on Monday showed net capital outflows
from the United States fell to $31.2 billion in June, down from
the prior month's $65.7 billion outflow, while net long-term
inflows rose to $90.7 billion. [ID:nN17305646]
                                
 (Additional reporting by Vivianne Rodrigues in New York and
Naomi Tajitsu in London)
 (Editing by Theodore d'Afflisio)