* Dollar recovers vs yen, rises above 90 level
* Japan's Fujii says won't rule out intervention
* Euro falls to two-week low vs dollar
* U.S. consumer confidence slips in September (Adds comment, updates prices, changes byline)
By Wanfeng Zhou
NEW YORK, Sept 29 (Reuters) - The U.S. dollar rose from an eight-month low against the yen on Tuesday after Japan's finance minister said the government might take action if currency moves were irregular.
The dollar also advanced against the euro, hitting a two-week high after a report showed U.S. consumer confidence fell unexpectedly in September and as traders said the dollar's slide this month may have been too much.
The Japanese currency soared to near 88 yen against the dollar on Monday after Hirohisa Fujii, the newly appointed finance minister, said he was comfortable with a strong yen as the government intends to boost domestic demand.
But Fujii later toned down his rhetoric and reiterated on Tuesday that while global competition to devalue currencies was wrong, this did not mean Tokyo would leave excessive yen rises unattended. For more, see ID:nT324421.
"The big change came from the finance minister, Mr. Fujii, who had for a couple of weeks said that he had no problem with a strong yen ... and then last night, he said that basically he may need to intervene to weaken the yen," said Chuck Butler, president of Everbank World Markets in St. Louis.
"The yen had gotten down to the 88 handle and that's quite strong. There's really no fundamental foundation for the yen to get much stronger," he added. The yen's rise "hurts their exporters."
In afternoon trading in New York, the dollar rose 0.6 percent to 90.16 yen JPY=>, near a session high around 90.39. The dollar hit as low as 88.22 yen on Monday, according to Reuters data, but recovered most losses later in the session.
"If moves are irregular, there is a possibility we might take whatever action deemed necessary for the sake of the country," Fujii told a news conference after a cabinet meeting.
Camilla Sutton, senior currency strategist at Scotia Capital in Toronto, said Monday's move in dollar/yen was the first piece of a bottoming formation, and a close above 89.79 would provide confirmation.
Some market players may still attempt to push the dollar toward January's 13-year low of 87.10 yen on the EBS trading platform and only then think seriously about the possibility of intervention, analysts say. Many expect a drop through 85 yen would be needed for the Japanese government to take action.
SAFE HAVEN
The euro EUR=> fell 0.3 percent to $1.4577 after dropping to a two-week low of $1.4524, according to Reuters data, as short-term players unwound some long euro positions.
The ICE Futures dollar index, which tracks the performance of the greenback versus a basket of six major currencies, was up 0.1 percent at 77.088 .DXY>.
"What's happening today is just mainly positioning," said Paresh Upadhyaya, portfolio manager at Putnam Investments in Boston. "The markets got very short dollars during the last few weeks and we're seeing a technical correction."
Adding to gains in the dollar was data showing U.S. consumer confidence fell unexpectedly in September, which offset an earlier report showing the S&P/Case-Shiller composite index of home prices in 20 metropolitan areas rose for a third straight month in July. ID:nN29136250
The weaker-than-expected consumer confidence data "spurred some (safe-haven) demand for the dollar," said Joe Manimbo, currency trader at Travelex Global Business Payments in Washington. "That's the type of data that would reinforce expectations for a sluggish recovery going forward."
In other trading, sterling GBP=> gained 0.4 percent to $1.5940 after a surprising jump in UK sales figures. (Additional reporting by Leah Schnurr; Editing by Dan Grebler)