* Investors debate impact of rising U.S. yields * Expectation of Fed tapering spurs dollar bids and offers * ECB's monetary policy seen remaining accommodative NEW YORK, Aug 16 (Reuters) - The dollar reversed course during New York trading on Friday to rise against the euro and yen after a report showed U.S. consumers were less optimistic, prompting a rise in risk aversion. The report indicated consumers, the backbone of the U.S. economy, were bracing for higher interest rates and slightly slower economic growth. But that was just one undercurrent among many as investors continued to adjust positions amid a rise in U.S. Treasury yields on expectations the Federal Reserve may start withdrawing monetary stimulus as soon as next month. While a cutback in stimulus is not a rise in official interest rates, investors are acting as if the rise in Treasury market yields is the equivalent. Higher U.S. yields would typically raise the attractiveness of dollar-denominated assets and boost the dollar. Quantitative easing, or bond purchases by the Fed for its own balance sheet, was uncharted territory until the central bank launched the operation in a major policy shift to try to help stabilize the economy. Now, investors are concerned that rising yields may lead to a broader sell-off in U.S. assets. "Without the U.S. consumer behind growth, the U.S. will struggle to have a stronger economy," said Michael Woolfolk, global market strategist at BNY Mellon in New York. "It's risk off." The dollar index rose 0.13 percent to 81.281. The euro was 0.12 percent lower on the day at $1.3332 after earlier touching a one-week high, while against the yen, the dollar was 0.22 percent higher at 97.57. The dollar swung between a peak of 97.77 yen and a trough of 97.03 yen. U.S. housing starts and permits for future home construction rose less than expected in July, suggesting higher mortgage rates could be slowing the housing market's momentum. Investors were still digesting Thursday's Treasury Department data that showed China and Japan led an exodus from U.S. Treasuries in June after the first signals the U.S. central bank was preparing to wind back its stimulus. [ID:nL2N0GG0LC} The sales were part of $66.9 billion of net sales by foreigners of long-term U.S. securities in June, a fifth straight month of outflows and the largest since August 2007, U.S. Treasury Department data showed. "Yesterday's data spooked investors into concern about a wholesale abandonment of U.S. assets," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. "If Treasury prices continue to fall, potential tapering may not be as broadly positive for the dollar as first thought. "Ultimately, rising bond yields will support the dollar, but not against such a big change in the backdrop." Ten-year Treasury yields traded at a two-year peak of 2.866 percent, while the gap between two-year Treasury yields and their Japanese counterpart rose to the highest in six weeks, Reuters data showed. Part of the reason for yen bids volatility was positioning ahead of the weekend. Japanese investors were missing the action this week due to the Obon holiday, but should be returning late Sunday New York time. Some of the strength in the dollar/yen in New York trade on Friday was buying ahead of that influx of investors. Just $1.94 billion in yen changed hands on Reuters Dealing Friday. The Bank of Japan embarked on a massive quantitative easing program in April, and with more fiscal and structural reforms likely to be put in place in coming months, more Japanese investors are looking overseas for higher yields. Still, amid the gyrations, most managers are looking for longer term dollar strength. In the United States, reasonably sturdy domestic data has bolstered expectations that monetary policy may not remain ultra-loose for long. "We remain constructive of the dollar and expect the Fed to start tapering in the near term," said Kenneth Dickson, investment director at Standard Life Investments in Edinburgh, which has $271 billion of assets under management.