The dollar fell against the euro on Friday after a gauge of consumer sentiment plunged to its lowest level since 1992, adding to fears that the U.S. economy may be slouching toward recession.

The euro pushed above $1.47 for the first time in nearly two weeks to trade at $1.4709, up half a percent from late Thursday, before easing to $1.4692. It traded around $1.4685 just before the Reuters/University of Michigan consumer sentiment data was released.

The dollar was also down half a percent against the yen at 107.40 yen, with most of those losses coming after the New York Federal Reserve's February manufacturing index posted its biggest monthly decline on record.

Alan Ruskin, international strategist at RBS Greenwich Capital, said the consumer data crowns a day of moderately negative second-tier numbers that undercut last week's premature thoughts of a more concerted dollar recovery.

The dollar had gained traction last week against major currencies, but the tide appears to have turned against it this week as U.S. recession fears weighed on markets.

Indeed, Friday's batch of grim data comes a day after Federal Reserve Chairman Ben Bernanke warned of continued sluggish growth and said the U.S. central bank will act as needed to provide insurance against downside risks.

Since September, the Fed has slashed its benchmark interest rate by 2.25 percentage points to 3 percent. Bernanke's remarks and recent economic data have left investors betting on another half percentage-point cut at the central bank's March meeting.

Expectations for the European Central Bank to follow with rate cuts of its own have faded, though, with ECB officials stressing that inflation is a bigger concern than growth.

That has continued to move rate spreads in favor of the euro, reducing the appeal of holding U.S. over euro-zone debt.

(Editing by James Dalgleish)

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