* Bernanke reappointment boosts stocks
* Case-Shiller report shows improving U.S. housing sector
* No clear direction in thin FX market (Recasts, updates prices, adds U.S. data, changes byline, dateline; previous LONDON)
By Gertrude Chavez-Dreyfuss
NEW YORK, Aug 25 (Reuters) - The dollar fell on Tuesday as a recovery in European shares and a rise in U.S. equities on Ben Bernanke's reappointment as Federal Reserve chairman encouraged investors to take on riskier trades.
President Barack Obama on Tuesday renominated Bernanke to a second term as Fed chairman as the U.S. economy attempts to come out of the worst recession since the Great Depression.
The yen, on the other hand, edged higher. It was up more sharply earlier after China's volatile Shanghai Composite Index fell, but the Japanese currency has since trimmed gains as European shares pulled back from declines and U.S. equities opened higher.
Jacob Oubina, currency strategist at Forex.com in Bedminster, New Jersey said the dollar's weakness could be traced to "gains in equity futures," with investors selling the greenback as risk appetite improved.
"Risk appetite has been the story all year and it will be for some time," Oubina said.
A report showing prices of U.S. single-family homes rose for a second consecutive month in June also boosted risk sentiment.
The S&P/Case-Shiller composite indexes of 10 and 20 metropolitan areas both rose 1.4 percent in June from May, almost three times the 0.5 percent increases of the month before.
The Bernanke story has been out for many hours, but currency markets were slow to react, with investors mainly taking their cue from equities. Analysts said the delayed reaction was quite normal in thin summer trading conditions as financial markets struggled to seek direction.
"Clearly, Mr. Obama's decision (to reappoint Bernanke) has been motivated by a realization that U.S. and global financial markets desperately need a sense of stability at a time when the banking system still remains vulnerable to further writedowns and credit contractions," said Boris Schlossberg, director of FX research at GFT in New York.
Early in the New York session, the euro rose 0.3 percent on the day at $1.4348, clawing back some losses after slipping to the day's low of $1.4254 according to Reuters data. It rose as high as $1.4361
The euro showed little reaction to figures confirming German's economy grew by 0.3 percent in the second quarter and exited a recession.
The ICE Futures' dollar index, a measure of the dollar's value against six major currencies, was down 0.4 percent at 77.970.
Against the yen, the U.S. currency fell as low as 93.80 yen in early trade. The Japanese currency was the main beneficiary of the pullback in risk demand, but the greenback has since recovered to trade at 94.22, still down 0.3 percent from late on Monday.
High-risk currencies struggled against the yen, with sterling down 0.2 percent to 154.86 yen. (Additional reporting Emelia Sithole-Matarise in London; Editing by Kenneth Barry)