FOREX-Dollar gains on rising U.S. durable good orders
* Dollar index gains after U.S. durable good orders
* 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 on Tuesday after a report showed orders for long-lasting U.S. manufactured goods rose more than expected in May and a gauge of planned business spending increased for a third straight month.
Durable good orders increased by a better than expected 3.6 percent 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..
"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."
Earlier the dollar index fell for the first time in a week against a currency basket 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 tapering its monthly $85 billion bond-buying programme.
But after the durable goods report, the dollar index rose 0.1 percent to 82.502 for its fifth straight day of gains and remained near Monday's near three week peak of 82.841.
The dollar was down 0.2 percent at 97.56 yen, off Monday's two-week high of 98.70 yen, with bids cited at 96.80 that could check the dollar's drop.
The euro surrendered gains and was last down 0.1 percent at $1.3108, though it held Monday's low of $1.3058, its weakest level since June 5.
"We could see the dollar consolidate here," said Ian Gunner, portfolio manager at Altana Hard Currency Fund in London. "Not only has the price action been a bit overdone but also the way the market has interpreted the way tapering will be done. Such tapering will be very data-dependent."
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.
"The dollar trend will remain very much in place... The dollar will not only be supported by the Fed tapering debate but if we see equity markets supported by Fed reassurance, that will be dollar-positive," said Ian Stannard, head of European FX strategy at Morgan Stanley in London.
Attention now shifts to the release of U.S. new home sales data for May, scheduled for 10:00 a.m. EDT.