FX OUTLOOK-Dollar may rebound next week on risk sentiment

* U.S. economic data could suppress appetite for risk

* Key data includes non-farm payrolls, pending home sales

* Higher-yielding currencies such as aussie may fall

By Vivianne Rodrigues

NEW YORK, Aug 28 (Reuters) - The U.S. dollar may rebound next week as volatile global equities and a slew of economic data may damp investors' riskier currency bets.

The economic calendar, which includes key labor, manufacturing and housing data, will be closely scrutinized for clues on the strength of the U.S. recovery. Evidence that the U.S. economic recovery is still fragile may hurt risk sentiment in the market.

On Friday, U.S. stocks came off 10-month highs after a report showed consumer confidence fell to its lowest level in four months in August. For details, see [ID:nN28366560]

Although the correlation between risk tolerance and the U.S. currency is not as strong as it had been, analysts said the greenback is still viewed as a haven and tends to rise when risk appetite falls.

"The strong correlation between a rising dollar and bad news has weakened but the currency is still vulnerable" to swings in risk appetite, said Matthew Strauss, a senior currency strategist at RBC Capital Markets, in Toronto.

"The dollar is likely to rebound at the start of next week especially if the data comes less supportive than expected because there has been doubts about the pace of the U.S. recovery," he added.

The dollar fell to multi-week lows against both the yen and the euro this week. Against the yen, it declined about 0.6 percent for a third straight week of losses, and was last trading little changed at 93.53 yen JPY=.

At current prices in New York, the euro was up just 0.1 percent versus the dollar over the week, but that was enough to give the single currency its third straight weekly gain. It was last up 0.1 percent at $1.4350 EUR=.

Meanwhile, demand for higher yielding currencies such as the New Zealand dollar remained high. The kiwi rose for the seventh straight week against the U.S. dollar but was last little changed at $0.6874 NZD=.

The Australian dollar also hit a two-week high on growing expectations the Reserve Bank of Australia will raise interest rates before the end of the year. It was last up 0.3 percent to $0.8423 AUD=.

Analysts said moves in major currency pairs are likely to be limited next week amid lower-than-average trading volumes as the U.S. summer holiday season comes to a close.

"The last two weeks of August is always the quietest week in the financial markets. With only junior traders manning the desks, there are no real conviction to any of the moves in the currency market," said Kathy Lien, director of currency research at GFT Forex in New York.

Lien added she expects volatility in the U.S. dollar ahead of next week's economic releases.

PAYROLLS, HOUSING DATA

Next week's data opens with a reading on August business activity in the U.S. Midwest on Monday. Tuesday has the release of the Institute for Supply Management's manufacturing index for August, and later the same day is a report on U.S. pending home sales for July.

Wednesday's reports include a private reading on U.S. employment for August, followed by factory orders data and a revised durable goods orders reading for July, as well as minutes of the Federal Reserve's last policy-setting meeting earlier in August.

A non-manufacturing ISM report for August and weekly jobless claims data follow on Thursday.

The week will close on Friday with a key Labor Department reading on non-farm payrolls for August. The latest Reuters poll showed economist expect the U.S. economy to shed 230,000 jobs this month, from 247,000 in July. For details, see [ID:nLS55839]. (Editing by Leslie Adler)