Oil fell on Wednesday for the first day in five as a rally that powered prices to three-month highs near $83 a day earlier lost steam, while industry data showed U.S. gasoline stockpiles rose unexpectedly last week.

The dollar hovered near a three-month trough against the euro following Tuesday's data showing U.S. consumer spending and incomes were flat in June and the index for pending sales of previously owned homes fell to a record low.

U.S. crude for September fell as much as 53 cents to $82.02 a barrel and was down 32 cents at $82.23 by 2:48 a.m. ET, after touching $82.64 on Tuesday, the highest intraday price for a front-month contract since May 5. On Monday it topped $80 for the first time in three months.

The market is taking a breath, said Clarence Chu, an energy trader at Hudson Capital Energy in Singapore. I can't rule out that it will rally again. The way it broke through $80 was very bullish for sentiment.

Front-month ICE Brent, which this week traded at a premium to the U.S. benchmark for the first time since mid June because of summer maintenance at North Sea oil fields, shed just 13 cents to $82.55.

Japanese equities fell on Wednesday after Wall Street stocks paused a day earlier, having reached their highest level in 2- months at the beginning of the week.

Disappointing earnings from Dow Chemical and Procter & Gamble on Tuesday and the weak U.S. macroeconomic indicators were weighing on share prices. .T

CURRENCY CORRELATION RETURNS

Investors sometimes turn to commodities to preserve value at times of declining financial markets. A weaker greenback also boosts the purchasing power for oil by developing nations where demand is surging.

For the last couple of days it has been all dollar-driven, Chu said. All the data indicates that the U.S. recovery is slowing down, most likely because of the end of the stimulus package.

Euro zone and U.S. non-manufacturing indicators will provide further direction for prices later on Wednesday, while government statistics on oil inventories and demand from top consumer the United States will follow at 1430 GMT.

U.S. crude stockpiles dropped by 776,000 barrels in the week to July 30, statistics from the American Petroleum Institute showed late on Tuesday, compared with analysts expectations for a 1.4 million barrel draw.

The nation's gasoline supplies posted a surprise increase of 2.3 million barrels, versus forecasts for a 400,000-barrel decline, while distillate fuel stockpiles including diesel rose 1.1 million barrels, roughly in line with expectations.

CHINA SLOWS DOWN

China's economy will cool further in the third quarter as fiscal stimulus starts to fade and the restocking cycle draws to a close, a government think tank said on Wednesday.

Annual gross domestic product growth will slow to 9.2 percent from 10.3 percent in the second quarter and 11.9 percent in the first, the State Information Center said in a report published in official media.

Tropical Storm Colin degenerated into a low pressure area as it encountered wind sheer in the western Atlantic Ocean, the U.S. National Hurricane Center said in its latest advisory late on Tuesday.

The disorganized system, which was not expected to regenerate in the near term, was not seen as a threat to Gulf of Mexico oil and gas production, with most computer models showing it tracking east of Florida and toward the Southeast U.S. coast.

BP (BP.L)(BP.N) pumped heavy drilling mud into its blown-out Gulf of Mexico well on Tuesday in a static kill operation it hopes will help permanently plug the world's worst accidental marine oil spill.

Elsewhere, a militant group linked to al Qaeda claimed that a suicide bomber from its organization was responsible for an explosion on a Japanese supertanker last Wednesday near the Strait of Hormuz.

(Editing by Clarence Fernandez)