* Euro rises vs dollar but gains tentative
* Risk sentiment choppy but some stocks hold gains
* U.S. data mixed but overall add to evidence of recovery (Recasts, updates prices, adds comment, U.S. data)
By Gertrude Chavez-Dreyfuss
NEW YORK, Aug 28 (Reuters) - The dollar slipped against the euro on Friday in choppy trading, with investors sticking to riskier currency bets as global stocks held gains despite a report showing U.S. consumer confidence fell to its lowest in four months.
The Dow and S&P 500 index surrendered gains, but European shares were higher, giving investors conviction to hold positions in currencies sensitive to higher growth, such as sterling and the Australian dollar.
Firmer oil prices, which possibly reflect an increase in global demand, also helped overall risk sentiment, analysts said.
The yen, however, trimmed losses to trade little changed on the day, recovering from Japanese jobless and deflation data.
The dollar and yen are viewed as safe-haven currencies and tend to fall when risk appetite improves.
"This morning's U.S. economic data was mixed, but the price action in the currency market indicates traders are struggling to remain optimistic," said Kathy Lien, director of currency research at GFT in New York.
In midday New York trading, the euro was up 0.2 percent on the day versus the dollar to $1.4380.
Friday's data showing U.S. consumer spending rose as expected in July and consumer confidence dropped in August but was stronger than forecast had modest currency impact. The reports did, however, add to growing evidence that the U.S. economy is gradually emerging from recession.
"I think September's going to give us a smack down from this risk play," said Dan Cook, senior market analyst at IG Markets in Chicago.
"What I call a 'dash for trash' in the stock market will have to end. We've run so far, so fast, it's not a matter of if, it's a matter of when we see a good-sized correction."
Cook believes investors will buy back the dollar going forward, "and come back strong as a safe-haven play."
The dollar was flat against the yen at 93.44 yen. The euro was 0.2 percent higher at 134.32 yen.
The yen was earlier undermined by economic reports overnight showing Japanese deflation and the unemployment rate at record levels and household spending fell sharply.
A Japanese national election on Sunday, with a possible landslide victory of the opposition Democratic party, also pressured the yen, analysts said.
Sterling, meanwhile, drew support at the end of a torrid month from data that showed the UK economy contracted at a slightly slower pace than previously thought.
The pound was up 0.3 percent against the dollar at $1.6310 GBP=> after revised UK gross domestic product figures showed a slightly slower pace of contraction in the second quarter of 0.7 percent.
But that still meant the annual rate of GDP decline was the biggest on record. Although much of the recent UK data has beat forecasts, sterling was on track to post its steepest monthly fall this year against the dollar in August.
The Australian dollar, on the other hand, hit a two-week high on growing expectations the Reserve Bank of Australia will raise interest rates before the end of the year.
The Australian currency rose 0.5 percent to US$0.8440, after rising to a two-week high of US$0.8464 struck earlier on Reuters.
Relatively strong domestic economic data and hawkish comments from RBA policymakers lately have prompted a shift in market expectations of when the central bank will hike rates to November from December. (Additional reporting by Steven C. Johnson in New York and Jamie McGeever in London; Editing by Kenneth Barry)