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TOKYO, July 26 (Reuters) The dollar steadied on Wednesday after rallying on U.S. consumer confidence and home sales data that slightly boosted expectations the Federal Reserve will bump up interest rates again next month.

The dollar had gained for a second straight day on Tuesday after the Conference Board's index of consumer sentiment rose in July, against forecasts for a slight drop, and U.S. sales of existing homes dipped in June by less than economists expected.

''The movement last night showed the sentiment of the market,'' said the chief trader at a European investment bank in Tokyo.

''The market is favouring another hike from the Fed.'' In early Tokyo trade, the euro was little changed at $1.2580 after falling half a percent on Tuesday.

The dollar inched down to 117.15 yen after rising half a percent in the previous session.

It was in sight of a three-month high of 117.88 yen struck last week before Fed Chairman Ben Bernanke said he expected economic growth to slow and inflation to moderate, denting expectations that the central bank would raise rates next month.

But the door has been left ajar for further rate rises, with the Fed reiterating that economic data is key.

''The Fed outlook is likely to remain the key driver of FX markets in the near term,'' JPMorgan wrote in a note to clients in the wake of the latest U.S. data.

Investors still have plenty of figures to scrutinise, including the Fed's Beige Book survey of economic conditions on Wednesday and U.S. durable goods orders and second-quarter U.S.

growth later in the week.

The Fed has boosted rates at 17 straight meetings to 5.25 percent, helping widen the dollar's yield advantage over the euro and yen.

Reuters SK VP0625