FOREX-Dollar to close August with best month in a decade

* Dollar has best month since January 1997

* Dollar index up over 5 pct in August

* Jump in U.S. Midwest business adds to dollar's allure (Recasts, updates prices, adds comment)

NEW YORK, Aug 29 (Reuters) - The dollar was on track to close out August with its best monthly rise in more than a decade on Friday as investors reacted to a slew of solid U.S. economic news for the week.

Sealing the dollar's gains against the euro in the New York session on Friday was a report showing business activity in the U.S. Midwest expanded at a far more robust rate than expected as new orders jumped. For more details, click [nNAT004324].

A separate report showing U.S. consumer confidence rose to a five-month high in August, posting a large recovery from depressed levels with the help of moderating energy prices, added to optimism surrounding the dollar even if it offered little new impetus in trading on Friday. [nN29410034].

The reports follow data earlier in the week showing greater-than-expected U.S. economic growth in the second quarter and strong durable goods orders for July.

"Again this stands out as robust relative to what is seen in Europe, and sends a now familiar signal of U.S. manufacturing competitiveness, notably relative to Europe," said Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut, in a research comment on the business activity report.

"This plainly is having an important effect in weighing down on euro/dollar, as it should," he said.

Midway through the New York session, the dollar index .DXY was up 0.1 percent on the day at 77.215. The euro was down 0.1 percent at $1.4685, around 13 cents off its all time high set in mid-July <EUR=>.

The dollar <JPY=> was down 0.9 percent against the yen at 108.62 yen.

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

"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.

EURO RESILIENCE

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

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