* ECB weighs new easing
* Wall St flat, European stocks rally
(Updates prices to late U.S. trading)
By Rodrigo Campos and Dion Rabouin
NEW YORK, Nov 25 (Reuters) - The U.S. dollar gained and the
euro briefly hit a seven-month low on Wednesday in a volatile
session on views the European Central Bank will ease monetary
policy further, including buying more debt and charging banks
for hoarding cash.
The greenback touched an eight-month high against a basket
of currencies as the latest batch of U.S. economic data
continued to support a Federal Reserve interest rate increase in
December.
Manufacturing output rose well above estimates in October
and a gauge of U.S. business investment plans surged. A survey
of factories also showed a rise in new orders last month.
U.S. consumer spending barely rose in October as households
took advantage of rising incomes to boost savings to the highest
level in nearly three years.
The major U.S. indexes were near unchanged at the close of a
quiet trading day, with gains in healthcare and consumer stocks
keeping the indexes flat.
"A lot of people are taking the day off and this is just
programs trading There's nothing happening today," said Peter
Costa, president at Empire Executions from the floor of the
NYSE.
The Dow Jones industrial average .DJI rose 1.2 points, or
0.01 percent, to 17,813.39, the S&P 500 .SPX lost 0.27 points,
or 0.01 percent, to 2,088.87 and the Nasdaq Composite .IXIC
added 13.34 points, or 0.26 percent, to 5,116.14.
Trading volume was low as many market participants were away
in the last session before the U.S. Thanksgiving holiday.
Markets will be closed Thursday and most of Friday afternoon.
European shares rallied, and an MSCI global gauge of
equities .MIWD00000PUS edged up 0.1 percent.
The few traders at work Wednesday kept an eye on
geopolitical risk, heightened earlier this week after Turkey
shot down a Russian fighter jet.
"The geopolitical situation is the risk that keeps me up at
night, as it continues to mutate in scary directions. It is
clearly the wild card," said Matthew Kaufler, portfolio manager
at Federated Investors in Rochester, New York.
Russia said on Wednesday it will send an advanced air
defense system to reinforce its air base in Syria and consider
cancelling a raft of joint business projects with Ankara.
CENTRAL BANK ACTION LOOMS
At its meeting next week the ECB will ease policy in some
way or another, according to economists polled by Reuters, many
of whom say the bank cannot pull back now after signaling its
intentions so clearly over the past month.
Numerous alternatives are open, from snapping up the bonds
of towns and regions to introducing a two-tier penalty charge on
banks that park money with the ECB.
Fed officials, on the other hand, are already sketching out
positions for a post-liftoff debate that may blur the lines
between inflation "hawks" and "doves."
The euro hit a session low of $1.0565 but sharply reversed
losses and was last down 0.1 percent at $1.0631; the dollar
index reached a high of 100.17 and was last up 0.2 percent at
99.68.
"We did see some extended short positions on the euro coming
in today, so they might have been covered a little bit there,"
said Thierry Wizman, global interest rates and currencies
strategist at Macquarie Limited in New York.
"We think that the short positioning on the euro is a bit
extended here in part because everyone expects the ECB to take
some measures next week to ease monetary policy in the euro area
further."
U.S. crude fell as much as 2.7 percent but ended up 0.6
percent at $43.12 per barrel in late trading while Brent added
0.3 percent to $46.24.
U.S. Treasury debt prices were supported by record low
yields for German government bonds and data that underscored the
view of muted domestic inflation.
Short-end German Bund yields DE2YT=TWEB DE5YT=TWEB fell
to record negative levels early in the session.
Benchmark 10-year Treasuries notes US10YT=RR edged up 3/32
in price to yield 2.2341 percent, down 1 basis point from late
on Tuesday.
The two-year yield US2YT=RR was unchanged at 0.9343
percent, which was within striking distance of the 5-1/2-year
peak seen on Nov. 6.