FOREX-US dollar down on day but has best month in 10 years

* Dollar slips but eyes best month since Jan. 1997

* Dollar index up over 5 pct in August

* Euro shrugs off soft inflation data

(Recasts with reaction to U.S. data, updates prices, adds comment, changes byline, changes DATELINE, previous LONDON)

By Nick Olivari

NEW YORK, Aug 29 (Reuters) - The U.S. dollar slipped on Friday with investors betting the currency's steepest monthly rise in over a decade was too far, too fast.

A report showing U.S. personal income tumbled unexpectedly in July, and spending slowed as the effects of government stimulus wore off, and an inflation measure at a 17-year high, had little impact on trading. For more details, click [nN28346862].

The euro was resilient in the face of lower than forecast euro zone inflation and weak sentiment indicators, as hawkish rhetoric from policymakers raised expectations for higher euro zone interest rates. [ID:nLT484244].

European Central Bank Governing Council member Klaus Liebscher echoed comments from other policymakers earlier in the week that inflation is too high [ID:nLT331903].

Still, as August comes to an end, the greenback is up more than 5.0 percent against a basket of currencies, heading for its biggest monthly gain since January 1997.

Uncertainty about the U.S. economy was much alleviated this week by reports showing stronger-than-expected U.S. growth in the second quarter and stronger July orders for durable goods.

"Thursday's revision to second quarter GDP continued the recent trend of firming data out of the US, though markets are still sceptical over the sustainability of such numbers," said UBS in a research note to clients.

Early in New York, the dollar index .DXY was down 0.2 percent on the day at 76.981. The euro was up 0.2 percent at $1.4727, but around 13 cents off its all time high set in mid-July <EUR=>.

The dollar <JPY=> was down 0.8 percent against the yen at 108.62 yen.

"The conclusion from this report I think is that the U.S. economy is nearing a bottom," said Greg Salvaggio, senior vice president of capital markets, Tempus Consulting in Washington of Friday's inflation report. "But the reason we didn't have a dollar reaction is that there aren't that many people on board because of the long holiday weekend."

STERLING SLIDES  Continued...