* Dollar up from 14-mth lows
* Yen slides broadly on yield spreads; 3-week low vs dlr
* Euro struggles at $1.50
* U.S. consumer sentiment report adds to safe haven demand
(Recasts, updates prices, adds detail)
By Nick Olivari
NEW YORK, Oct 16 (Reuters) - The dollar rallied on Friday as risk tolerance dropped on data showing U.S. consumer sentiment eased in October and prompted safe-haven buying.
U.S. consumer sentiment fell unexpectedly this month on persistent worries that the "dismal" state of personal finances would not recover quickly from the worst recession in decades, a report showed on Friday. For details, click [ID:nN16340389].
The report added to investor pessimism about the global economy and financial markets. Earlier in the day, Bank of America earnings fell short of expectations, sparking some safe haven buying against currencies that had earlier touched multi-month highs against the greenback.
The dollar's broad recovery, though modest, was enough to take it further away from the psychologically key $1.50 level against the euro and further above the 90.00 yen level.
"It's not a particularly good report as we saw a big drop in the outlook," said Shaun Osborne, chief currency strategist at TD Securities in Toronto of the consumer sentiment data. "It's a case of poor data hurting equities but supporting the dollar in a risk-off and risk-on mentality."
The euro was last down 0.4 percent at $1.48762
The dollar has traded inversely to stocks and financial market sentiment recently as the huge supply of dollars around the world and expectations of prolonged low U.S. interest rates has fueled demand for other currencies and assets.
Bank of America Corp
"The (FX) market is going to be focused on Bank of America and see if the Dow (Jones industrial average) closes down," said Greg Salvaggio, vice president of trading at Tempus Consulting in DC. "The dollar is at a precarious level and watching the $1.50 (euro/dollar) bellwether level."
The dollar hit 14-month lows on an index basis and against the euro on Thursday, and matched the euro trough earlier on Friday, as well as touching a fresh 14-month high against the Australian dollar on Friday.
But the BofA results prompted traders to rethink positions ahead of the weekend.
YEN WEAKNESS WIDELY SPREAD
The Australian dollar was down 0.5 percent at $0.9164
But sentiment towards the U.S. currency remains broadly negative, and it is not far from these 2009 lows against the euro and higher-yielding currencies such as the Australian and New Zealand dollars.
Analysts said the dollar's rise on Friday did not reflect any change to this broad scenario but said investors were wary that currencies such as the euro and the Australian dollar may have limited scope for further gains. The euro, in particular, faced stiff resistance before the key $1.50 level.
The yen bore the brunt of the dollar's recovery on Friday, and also slid against other currencies as Japanese investors sought out higher returns from foreign fixed income markets.
There was no reaction to Treasury Department capital flows data.
Net overall capital inflows into the United States rebounded to $10.2 billion in August from a revised outflow of $107.7 billion the previous month, the Treasury Department said on Friday. [ID:nN16345151].
"It's not too exciting," said Amelia Bourdeau, senior currency strategist at UBS in Stamford Connecticut. "I just think the TICs data is lagging so there was very little reaction." (Additional reporting by Gertrude Chavez-Dreyfuss in New York and Jamie McGeever in London, Editing by Chizu Nomiyama)