Mexico's peso falls after halt in dollar auctions

* Peso falls almost 1 percent after auction halt

* Currency still supported by U.S.-Mexico spread

* Stocks recover after hitting six-month low (Recasts; adds quote, final prices, byline)

By Michael O'Boyle

MEXICO CITY, July 25 (Reuters) - Mexico's peso weakened sharply on Friday after the central bank said it would suspend its daily dollar auctions, and stocks rose after unexpectedly strong U.S. consumer confidence and housing data.

The peso MXN MEX01 weakened 0.98 percent at the central bank's final 1:30 p.m. (1830 GMT) reference to 10.11 per dollar.

The benchmark IPC stock index .MXX closed 0.77 percent higher at 27,084.77 points after stocks fell to a six-month low on Thursday amid fears about the U.S. housing market.

Mexico's central bank said on Friday it would suspend on Aug. 1, until further notice, a daily sale of $32 million from its foreign reserves after the government bought $8 billion from the bank to cover foreign exchange requirements for the coming months.

Many traders had expected the peso to break past the psychological level of 10 pesos per dollar in coming days on bets the central bank will boost interest rates again in the next months after already hiking rates twice since June in its fight against inflation.