* Euro gains vs dlr; trade still very thin
* Aussie jumps more than 1 pct to 12-day high vs dollar
* Dlr stays supported vs yen on U.S. economic outlook
(Recasts, adds quote, updates prices, changes dateline, previous LONDON)
NEW YORK, Dec 29 (Reuters) - The dollar fell against the euro and higher-yielding currencies such as the Australian dollar on Tuesday on improved risk appetite amid expectations for a U.S. economic recovery.
Volumes were thin, however, and analysts were wary of drawing too many conclusions from intraday movements.
"Thin year-end activity has seen the U.S. dollar weaken," Marc Chandler, head of global currency strategy at Brown Brothers Harriman in New York, said in a note to clients. "Some contacts linked the euro buying to month-end demand, with some tied to sterling offers too."
Against the yen, the dollar stayed supported, hovering close to a two-month high on the view that the U.S. economy is recovering well, which has lifted U.S. Treasury yields.
"The yen is under-performing as the dollar continues to consolidate recent gains in the upper end of its week long trading range," Chandler said.
In early New York trade, the euro was up 0.4 percent at
$1.4439
The higher-yielding Australian dollar rose 1.2 percent to a
12-day high, and last traded at US$0.8877
The dollar index, a non-traded gauge of the greenback's performance against six major currencies, fell 0.3 percent to 77.491 <.DXY>.
The dollar index was still in sight of a 3-1/2-month high touched last week, but some traders said the U.S. currency may struggle to rise further after speculators have finished covering short dollar positions.
Data on Monday showed speculators were long in the U.S. currency for the first time since May, ending 32 straight weeks of short dollar positions. [nN28138355]
Against the yen, the dollar rose 0.1 percent to 91.69 yen
Traders said upward pressure on long-term Treasury yields is providing support to the dollar against the yen after U.S. government bonds traded lower the previous day and pushed the benchmark 10-year note yield to its highest in nearly five months. [US/]
The dollar showed little reaction to the Federal Reserve's proposal on Monday to create a new mechanism, a "term deposit facility", to help the central bank's policymakers withdraw money from the banking system when they decide to tighten monetary policy. [nFEDAHEAD]
Later in the session, investors will scrutinise the
Standard & Poor's/Case-Shiller home price index for October at
9:00 a.m. (1400 GMT) and U.S. consumer confidence for December
at 10:00 a.m. (1500 GMT)