GLOBAL MARKETS-US dollar falls on recovery worries; stocks up

* U.S., European shares advance; gold rallies

* 10-year Bund yield falls below 3 percent

* Swiss franc rallies to record high vs dollar, euro (Updates prices, adds comment, details)

By Wanfeng Zhou

NEW YORK, May 27 (Reuters) - The U.S. dollar fell broadly on Friday after weaker-than-expected U.S. consumer spending and housing data stoked worries the recovery is losing momentum, while gold hit its highest in more than three weeks.

Wall Street edged up, led by energy and materials stocks, but trading was light ahead of Monday's Memorial Day holiday.

The euro soared more than 1 percent to above $1.43 after reassuring comments out of Europe tempered fears of a near-term Greek default, although it slipped to another record low versus the Swiss franc as the region's debt crisis remains far from resolved.

Pending sales of existing U.S. homes dropped far more than expected in April to touch a seven-month low, dealing a blow to hopes of a recovery in the housing market. Separate data showed U.S. consumer spending rose less than expected in April. For details, see [ID:nN271881]

"Softer U.S. data may renew the debate about the introduction of a third round of quantitative easing, and that's a negative for the dollar," said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto, referring to Federal Reserve efforts to bolster the recovery.

World equities measured by the MSCI All-Country World Index <.MIWD00000PUS> rose 1 percent, though they remain on pace for their biggest monthly percentage losses since August, 2010.

The Dow Jones industrial average <.DJI> was up 63.80 points, or 0.52 percent, at 12,467.01. The Standard & Poor's 500 Index <.SPX> was up 6.52 points, or 0.49 percent, at 1,332.21. The Nasdaq Composite Index <.IXIC> was up 15.48 points, or 0.55 percent, at 2,798.27.

"We're having a little bit of a snap-back rally given the stretch of sell-offs we had earlier this week," said Doug Godine, head of institutional sales and trading at Signal Hill Capital in Baltimore. "I don't think there will be a lot of volume today, as no one is going to make any huge bets going into the holiday weekend."

Nomura said in a note that global fund investors increased their selling of equities to a net $9.4 billion for the week of May 19-25, the heaviest in 10 months.

Europe's FTSEurofirst 300 <.FTEU3> index of leading stocks added 0.7 percent.

The weaker dollar, along with persistent Middle East tensions, helped boost oil prices. The dollar <.DXY> fell 0.8 percent against a basket of currencies and hit a record low versus the Swiss franc .

Brent crude earlier touched $115.68 a barrel, before pulling back to $114.88, down 19 cents. U.S. crude was up 10 cents at $100.32, having touched $101.24.

Spot gold last traded at $1536.30 a troy ounce. Gold's appeal has also been boosted in recent weeks by Europe's spreading debt crisis.

GREECE WORRIES

Worries about Greece pushed 10-year German Bund yields below the key 3 percent level after doubts grew on Thursday over whether the International Monetary Fund would release the next aid tranche for the debt-laden country.

Greece's prime minister failed to convince opposition leaders on Friday to support tougher austerity measures to free up EU/IMF aid needed to avert a debt default. [ID:nLDE74Q0TQ]

But the euro gained momentum in the New York session after European Central Bank Governing Council member George Provopoulos said Greece will be able to repay its debt in full without restructuring if it sticks to its austerity plan. [ID:nFAT007211].

French President Nicolas Sarkozy said France would defend and support the euro. He also said the country was opposed to any kind of debt restructuring for Greece. [ID:nP6E7GA026]

"Those comments reduce the near-term risk of Greek default and eased the pressure on the euro," said Joe Manimbo, currency strategist at Travelex Global Business Payments in Washington.

The euro was up 0.9 percent at $1.4271 though it slipped to a record low of 1.21474 Swiss francs

The dollar lost 0.7 percent to 80.78 yen . Fitch cut its outlook on Japan's sovereign debt ratings, saying the cost of the March earthquake and tsunami and the still-unknown bill for the clean-up after the nuclear crisis would further strain the country's public finances.[ID:nL3E7GR1A6]

U.S. Treasuries made up early losses to be little changed after the release of weak U.S. housing data. Benchmark 10-year Treasuries last yielded 3.06 percent. (Additional reporting by Gertrude Chavez-Dreyfuss, Angela Moon and Ryan Vlastelica in New York, Zaida Espana and Dominic Lau in London; Editing by Dan Grebler)