FOREX-Euro drifts higher, boosted by month-end buying

* Month-end fixing demand boosts euro

* Euro on track for biggest monthly fall since Jan 2009

* U.S. consumer spending flat, dims risk appetite

(Recasts, adds quote, U.S. data, updates prices, changes byline, dateline; previous LONDON)

By Gertrude Chavez-Dreyfuss

NEW YORK, May 28 (Reuters) - The euro edged higher against the dollar on Friday, boosted by month-end demand as investors square up positions for May, a period which featured massive selling of the single currency due to the ongoing debt crisis in the region.

The euro fell some 12 cents against the dollar in the month to hit a 4-year low of $1.2143. It was on track for a hefty 6.9 percent monthly decline, which would be the biggest drop since January 2009. It would also be the sixth straight monthly fall.

That was in spite of a $1 trillion safety net set up by European officials earlier this month to ward off the adverse effects from Greece's debt problems which threatened to spill over into other euro zone countries, and the announcements of new austerity measures from Spain and Portugal.

"The main feature is the covering of short euro positions and this has lifted the single currency...against the dollar. Its downside momentum has faded and the near-term risk is position squaring," said Brown Brothers Harriman in a research note.

In early New York trading, the euro was slightly up against the dollar at $1.2379 , after rising to $1.2452.

U.S. data showing consumer spending was unexpectedly flat in April, its weakest reading since September, initially weighed on the euro after stocks traded flat. [ID:nN27266059].

In recent weeks, the euro has become a proxy for risk appetite in the currency market amid the euro zone's ongoing debt crisis, rising and falling in tandem with global stocks.

But the euro quickly recovered as month-end buying resumed.

Analysts said a key support level was $1.2135, the 50 percent Fibonacci retracement of the 2000-08 advance, just above the recent four-year low of $1.2143.

Charts show a monthly close below $1.2135 would favour more weakness, with analysts seeing the next downside support at $1.1640, a trough hit in November 2005.

While market turmoil has calmed, concerns about the euro zone remain entrenched.

"The financial package was a big step but it has its flaws. The biggest issue is the turnaround by the European Central Bank in buying government bonds," said Derek Halpenny, European head of global currency research at Bank of Tokyo-Mitsubishi UFJ.

Against the yen, the euro was up at 112.81 yen.

The dollar was little changed at 91.15 yen, while the dollar index <.DXY>, which measures the greenback's performance against a basket of currencies, was flat at 86.169. (Additional reporting by Tamawa Desai in London; Editing by Chizu Nomiyama)