* ECB weighs new easing
* Wall St flat, European stocks rally (Updates prices to late U.S. trading)
By Rodrigo Campos and Dion Rabouin
NEW YORK, Nov 25 (Reuters) - The U.S. dollar gained and the euro briefly hit a seven-month low on Wednesday in a volatile session on views the European Central Bank will ease monetary policy further, including buying more debt and charging banks for hoarding cash.
The greenback touched an eight-month high against a basket of currencies as the latest batch of U.S. economic data continued to support a Federal Reserve interest rate increase in December.
Manufacturing output rose well above estimates in October and a gauge of U.S. business investment plans surged. A survey of factories also showed a rise in new orders last month.
U.S. consumer spending barely rose in October as households took advantage of rising incomes to boost savings to the highest level in nearly three years.
The major U.S. indexes were near unchanged at the close of a quiet trading day, with gains in healthcare and consumer stocks keeping the indexes flat.
"A lot of people are taking the day off and this is just programs trading There's nothing happening today," said Peter Costa, president at Empire Executions from the floor of the NYSE.
The Dow Jones industrial average .DJI rose 1.2 points, or 0.01 percent, to 17,813.39, the S&P 500 .SPX lost 0.27 points, or 0.01 percent, to 2,088.87 and the Nasdaq Composite .IXIC added 13.34 points, or 0.26 percent, to 5,116.14.
Trading volume was low as many market participants were away in the last session before the U.S. Thanksgiving holiday. Markets will be closed Thursday and most of Friday afternoon.
European shares rallied, and an MSCI global gauge of equities .MIWD00000PUS edged up 0.1 percent.
The few traders at work Wednesday kept an eye on geopolitical risk, heightened earlier this week after Turkey shot down a Russian fighter jet.
"The geopolitical situation is the risk that keeps me up at night, as it continues to mutate in scary directions. It is clearly the wild card," said Matthew Kaufler, portfolio manager at Federated Investors in Rochester, New York.
Russia said on Wednesday it will send an advanced air defense system to reinforce its air base in Syria and consider cancelling a raft of joint business projects with Ankara. urn:newsml:reuters.com:*:nL8N13K1M1
CENTRAL BANK ACTION LOOMS
At its meeting next week the ECB will ease policy in some way or another, according to economists polled by Reuters, many of whom say the bank cannot pull back now after signaling its intentions so clearly over the past month. urn:newsml:reuters.com:*:nL9N0WZ01K
Numerous alternatives are open, from snapping up the bonds of towns and regions to introducing a two-tier penalty charge on banks that park money with the ECB. urn:newsml:reuters.com:*:nL8N13I42U
Fed officials, on the other hand, are already sketching out positions for a post-liftoff debate that may blur the lines between inflation "hawks" and "doves." urn:newsml:reuters.com:*:nL3N13F4SQ
The euro hit a session low of $1.0565 but sharply reversed losses and was last down 0.1 percent at $1.0631; the dollar index reached a high of 100.17 and was last up 0.2 percent at 99.68.
"We did see some extended short positions on the euro coming in today, so they might have been covered a little bit there," said Thierry Wizman, global interest rates and currencies strategist at Macquarie Limited in New York.
"We think that the short positioning on the euro is a bit extended here in part because everyone expects the ECB to take some measures next week to ease monetary policy in the euro area further."
U.S. crude fell as much as 2.7 percent but ended up 0.6 percent at $43.12 per barrel in late trading while Brent added 0.3 percent to $46.24.
U.S. Treasury debt prices were supported by record low yields for German government bonds and data that underscored the view of muted domestic inflation.
Short-end German Bund yields DE2YT=TWEB DE5YT=TWEB fell to record negative levels early in the session.
Benchmark 10-year Treasuries notes US10YT=RR edged up 3/32 in price to yield 2.2341 percent, down 1 basis point from late on Tuesday.
The two-year yield US2YT=RR was unchanged at 0.9343 percent, which was within striking distance of the 5-1/2-year peak seen on Nov. 6.