* Dollar, yen rally after U.S. July consumer data
* Dollar rebounds from 2009 trough vs basket of currencies
* U.S. consumer confidence fell more than expected to 46.6
* Aussie dollar gains on rate hike expectations (Adds comments, updates prices)
By Wanfeng Zhou
NEW YORK, July 28 (Reuters) - The dollar rebounded on Tuesday from its lowest level this year against a basket of currencies as a drop in U.S. consumer confidence fueled worries about the economy, enhancing the greenback's safe-haven appeal.
The weaker-than-expected U.S. data added to pessimism already in the financial markets sparked by disappointing quarterly results from a handful of major companies such as Office Depot Inc.
That weighed heavily on stock and oil prices and dragged down the Australian dollar from its highest level against the U.S. currency since last September. The yen rallied across the board as investors dumped riskier assets.
"Consumers are feeling no love in this recovery," said Boris Schlossberg, director of currency research at GFT Forex in New York. "All this suggests is that the critical assumption by the recovery bulls that consumption will come back as the recovery takes hold is faulty."
The ICE Futures U.S. dollar index, which measures the performance of the greenback against a basket of currencies, rose 0.4 percent to 78.964. It had earlier fallen to a low of 78.315, its lowest since December.
The euro fell 0.7 percent to $1.4152, having earlier climbed as high as $1.4303, its highest since early June, according to Reuters data.
The dollar had come under pressure in recent weeks as largely positive economic data and U.S. corporate earnings results stoked expectations that the global economy was on the mend.
"We've had a nearly two-week run-up in stocks and a flight into riskier currencies. Markets are kind of technically overbought in terms of risk and due for a bounce," said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Connecticut. "We probably overshot in terms of expectations about the economy."
CONSUMER CONFIDENCE
The dollar fell 1.1 percent to 94.17 yen, while the euro dropped 1.7 percent to 133.30 yen.
U.S. consumer confidence fell more than expected to 46.6 in July, Conference Board data showed, recording its second consecutive decline as sentiment remained hampered by a difficult job market.
"We've seen some rolling over in the euro/dollar with some people returning to dollars because consumer confidence was a bit disappointing," said Brian Kim, currency strategist at UBS in Stamford, Connecticut.
"Fundamentally, there's cause for concern even though some of the data has been better. And if markets stumble, people will go back to the dollar and yen."
Traders awaited 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 securities.
The Australian dollar earlier rallied to a high of US$0.8338 after Australia's central bank governor fueled speculation interest rates may rise soon. The Aussie dollar also hit a seven-week high against the 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.