FOREX-Euro hits two

FOREX-Euro hits two-week low on risk aversion, stocks drop

* Euro hits 2-week low against dollar and yen

* Global shares, oil prices stumble, denting risk demand

* NY factory activity surges but consumer worries persist

* Japan Q2 GDP up; China cuts Treasury holdings

(Adds details; updates prices)

By Vivianne Rodrigues

NEW YORK, Aug 17 (Reuters) - The euro hit a two-week low against the dollar and neared a one-month trough against the yen on Monday as world stock markets fell and doubts about a U.S. recovery prompted investors to cut exposure to risk.

The yen rallied across the board as investors bought it as a safe haven, while a slide in oil prices hit currencies such as the Australian dollar, which retreated from recent 10-month highs against the greenback.

A multimonth equity rally started to sputter late last week after data showed U.S. consumer sentiment declined for a second straight month. Stocks in Asia responded Monday by falling more than 3 percent and the sell-off continued in Europe and on Wall Street.

Data showing Japan's economy grew between April and June for the first time in five quarters was largely ignored, and a surge in New York state factory activity had only a modest effect.

"People have started to feel that the market rally moved well ahead of the actual economic improvement," said Vassili Serebriakov, currency strategist at Wells Fargo in New York.

"The rebound in the S&P has been its fastest in the post-war (period), and so people are getting nervous that things have come too far, too fast," said Rob Minikin, senior currency strategist at Standard Chartered in London.

In late afternoon trading in New York, the euro was down about 0.9 percent at $1.4079 EUR=, just above a two-week low. It was down 1.5 percent at 132.81 yen EURJPY= after hitting its lowest level since July 22. The dollar fell 0.5 percent to 94.45 yen JPY=.

A pullback in risk appetite in the near term should favor the dollar, Brian Kim, a currency analyst at UBS AG said in a note.

Sterling hit a one-month low earlier and was last down 1.2 percent at $1.6337 GBP= while the Australian AUD= and New Zealand dollars NZD=each fell sharply against the greenback. Continued...

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