* Dlr down vs yen, up vs euro after weak confidence data
* Shift to safer forex assets on recovery worries
* Market braced for Bernanke testimony Wednesday, Thursday
* Weak German Ifo weighs on euro, risk appetite
(Adds details, updates prices. Changes byline)
By Luciana Lopez and Vivianne Rodrigues
NEW YORK, Feb 23 (Reuters) - The dollar fell against the yen but rose against the euro on Tuesday after U.S. consumer confidence slid to a 10-month low and sapped risk appetite.
American consumers in February were in their gloomiest mood since April 2009 as their outlook for the job market worsened, a private report showed on Tuesday.
The dollar was 1.2 percent lower at 90.04 yen in afternoon trading in New York. The yen often gains when risk aversion rises as investors unwind trades that were financed with the low-yielding Japanese currency.
The safe-haven dollar rose against the euro, which last traded at $1.3525, down 0.5 percent on the day, after dropping as low as $1.3501.
"I'm not surprised to see the forex markets reacting by shifting positions into safer assets," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.
"The headline may be overstating the softness in consumer behavior but it highlights risks to the economic recovery going forward. In the short-term, safer assets, such as the yen, will get a bit of a boost," he added.
Analysts said the market remained wary of Greece's fiscal problems, which would keep the euro vulnerable to selling even if it did benefit from short-term bouts of profit-taking.
"The euro tone is so negative that strong data is helpful for the dollar and weaker data is seen as a mild negative for the euro because of the risk appetite consideration," said Alan Ruskin, chief international strategist at RBS Securities in Greenwich, Connecticut.
Early demand for the euro fizzled after data showed Germany's Ifo business sentiment index unexpectedly fell this month and an Ifo economist said Germany's economy, the euro zone's biggest, may have contracted in the first quarter.
The recent fall in the euro is not totally unjustified, though concerns about contagion from Greece's debt problems are overblown, European Central Bank Executive Board member Jose Manuel Gonzalez-Paramo was quoted as saying.
Elsewhere, sterling lost nearly 2 cents from a high of the day of $1.5574 to hit a session low of $1.5395 after Bank of England policy makers said further asset purchases under its quantitative easing program were possible. It was last little changed on the day at $1.5472.
A report showing a decline in U.S. home prices in 20 metropolitan areas in December left investors anxious as well.
From here, the focus shifts to Federal Reserve Chairman Ben Bernanke, who testifies before Congress on Wednesday and Thursday. Investors will be looking for any comments on the Fed's decision late last week to raise its discount rate -- the rate charged to banks for emergency loans, which was lowered after the collapse of Lehman Brothers.
The Fed said the move on the discount rate was not a harbinger of higher borrowing costs for the broader economy. It reiterated that the federal funds rate, its main monetary policy tool, would remain low for an extended period.
(Additional reporting by Steven C. Johnson and Wanfeng Zhou in New York; Editing by Andrew Hay)