* Euro hits 8-wk high of $1.4305 but fails to sustain
* Dollar briefly hits 2009 trough vs FX basket
* European shares pare gains
* Aussie dollar rallies on hawkish RBA remarks
(Adds detail, updates prices)
By Tamawa Desai
LONDON, July 28 (Reuters) - The dollar edged lower against most major currencies on Tuesday, hitting an eight-week low against the euro as investor sought riskier assets, though the greenback's losses were tempered after share prices pared gains. European shares turned slightly negative by late morning trade, erasing early gains after posting their highest close since November on Monday.
By 1103 GMT, the euro was up 0.1 percent at $1.4267, having climbed as high as $1.4305 on electronic trading platform EBS, its highest since early June.
Gains in the single European currency helped to push the dollar index down to 78.315, its weakest since December, before recovering to around 78.474.
"So far the euro has failed to hold above this ($1.43) level with the slightly softer tone of stock markets in Europe draining some of the enthusiasm for risk," said Jane Foley, research director at FOREX.com.
The dollar rose to just below last week's high against the yen at 95.30 yen, but later slipped to 94.70 yen, down 0.5 percent on the day.
Markets were wary ahead of U.S. consumer confidence data, which is expected to show a drop to 49.0 in July from 49.3, after strong U.S. home sales data on Monday fuelled recovery hopes. U.S. home prices data for May are also due out later in the day.
Traders will also watch the outcome of a sale of $42 billion of two-year U.S. government paper later in the day. A record $115 billion in new debt is being auctioned this week, including $96 billion in new coupon auctions.
AUSSIE DOLLAR RALLIES
The Australian dollar rallied to its highest level against the U.S. unit since last September after Australia's central bank governor fuelled speculation interest rates may rise soon.
The Aussie dollar jumped 1.3 percent on the day to $0.8339. The Aussie dollar also hit a seven-week high against the yen of 79.29 yen.
Reserve Bank of Australia Governor Glenn Stevens said risks to the economy were now more balanced and that low interest rates could inflate a housing bubble, the clearest sign yet that it was likely done with easing policy.
"This ... reinforces the view that the RBA is likely to be the first G10 central bank to hike," analysts at CitiFX wrote in a research note.
Other commodity-linked currencies also gained. The Canadian dollar hit its highest of the year against the U.S. unit of C$1.0750, while the New Zealand dollar rose to around a 10-month high of $0.6635. The Norwegian crown hit a 8-week high against the euro at 8.7538 crowns. (Additional reporting by Naomi Tajitsu; editing by Andy Bruce)