* Dollar rebounds from seven-week low against euro
* U.S. retail sales fall in April for a second month
* Renewed risk aversion leads to slide in high-yielders
* Dollar slides to lowest vs yen since March, however (Adds details, updates prices)
By Vivianne Rodrigues
NEW YORK, May 13 (Reuters) - The dollar rallied broadly on Wednesday as an unexpected decline in April's U.S. retail sales raised concerns about the state of the country's economy and rekindled demand for the greenback as a safe haven.
The report, which showed sales at U.S. retailers slipped 0.4 percent last month, dimmed optimism about hopes for a rapid recovery in the world's largest economy. Economists polled by Reuters had forecast April sales would be flat after falling in March. For details see [ID:nN13384420].
After being sold off the past few weeks, the dollar rose from four-month lows against a basket of currencies and seven-week troughs against the euro, and gained sharply against some higher-yielding currencies such as the Australian and New Zealand dollars which tracked a slide in Wall Street stocks.
"Green shoots of a global recovery were hit by a round of frosty economic data today," said Vassili Serebriakov, a currency strategist at Wells Fargo Bank in New York. "The U.S. consumer still appears under significant pressure with retail sales unexpectedly falling."
"The greenback is somewhat firmer today, although still reversing only a fraction of its recent decline," he added.
The dollar's uptrend this past year was consistent with safe-haven flows as a global slowdown accelerated, with investors brushing off the country's extreme fiscal weakness. But that support is expected to fade once investors price in the United States' enormous debt load over the next few years.
In late afternoon trading in New York, the euro was 0.4 percent lower at $1.3584, after touching a session low of $1.3567 <EUR=>, according to Reuters data. The European currency earlier hit a seven-week high of $1.3721.
The ICE Futures' dollar index, which measures the value of the dollar against a basket of other major currencies, rose 0.3 percent on the day to 82.612 .DXY, having hit a four-month low of 81.871.
Serebriakov said weak U.S. data later this week may boost risk aversion and pave the way for the dollar to rebound to the 1.32 level against the euro. But much of that reaction will depend on equity and commodity markets' reaction, he said.
Investors' focus may now turn to reports on U.S. industrial output and consumer prices for April, and to a sentiment reading scheduled for release this week. [ECI/US]
The dollar fell earlier to fresh lows after an article in the Financial Times flagged a risk of the United States losing its top sovereign credit rating.
While analysts warned against reading too much into the article, they said a downgrade would have huge economic, political and financial implications.
"If the U.S. loses its rating, we could see a massive outflow of foreign investment," said Kathy Lien, director of foreign exchange research at GFT Forex in New York. "Also, a downgrade is the perfect excuse to push through an alternative reserve currency to replace the dollar."
STERLING, HIGH YIELDERS SLIDE
Sterling fell against the dollar after the Bank of England said it expects anemic UK inflation and the economy to recover more slowly than previously thought. The pound was down 0.9 percent on the day at $1.5141 <GBP=>.
The British currency's sharp fall relieved some of the selling pressure on the dollar that had intensified since last week's break below key 200-day and 200-week moving average support levels on technical charts.
Meanwhile, the dollar slid about 1.2 percent against the yen to a session low of 95.25 yen <JPY=>, its lowest since March 20, according to Reuters data. Talk about the potential for repatriation flows from Japanese investors related to redemptions and coupon payments on U.S. debt this week also helped push the dollar lower against the yen, traders said.
Higher-yielding currencies such as the Australian and New Zealand dollars were among Wednesday's biggest decliners. The Australian dollar fell 1.8 percent to US$0.7515 <AUD=>, and the New Zealand dollar dropped 2.4 percent to US$0.5905 <NZD=>. (Additional reporting by Gertrude Chavez-Dreyfuss; Editing by James Dalgleish)