* Dlr/yen gains more than 1 pct, pulls away from 7-mth low
* Yen sags as Tokyo shares and U.S. S&P futures rise
* Aussie dollar gets some reprieve
* Worries over China's economy linger
(Updates prices, adds comments)
By Masayuki Kitano and Shinichi Saoshiro
SINGAPORE/TOKYO, Aug 25 (Reuters) - The dollar rose more
than 1 percent against the yen on Tuesday and pulled away from
seven-month lows as investor risk aversion showed signs of
easing, but the outlook remained clouded by worries about
slowing Chinese growth.
Traders said a rise in U.S. stock index futures and a bounce
in Tokyo equities .N225 from session lows helped spur
dollar-buying against the yen. There was also talk of
dollar-buying by Japanese players.
Such factors helped bolster the greenback, which had tumbled
4 percent against the yen over the two previous days as the
recent turmoil in global financial markets whittled down bets
that the Federal Reserve will raise interest rates in September.
The dollar rose 1.3 percent to 120.00 yen JPY= , pulling
away from Monday's trough of 116.15 yen, which was the dollar's
lowest level since mid-January.
The greenback, however, is still well below levels around
123 yen to 124 yen where it was trading last Thursday.
Whether investors will continue to buy back the dollar will
hinge on the U.S. economy's outlook, said Masashi Murata,
currency strategist for Brown Brothers Harriman in Tokyo.
"Heightened concerns about a global slowdown have triggered
the recent moves...Since there's no change to the view that
China is not doing well, the key becomes the U.S.," he said.
In a sign of investor concerns about China's economic
health, Shanghai shares fell 4.3 percent .SSEC after plunging
more than 8 percent on Monday.
A near-term key for the dollar is whether it can rise back
above the 200-day moving average, said Murata at Brown Brothers
Harriman. That resistance now lies roughly around 120.70 yen.
Besides receding expectations for a Fed rate rise in
September, the dollar has also come under pressure as market
turmoil prompted the unwinding of carry trades funded in the
low-yielding euro and yen.
In times of financial stress, the euro and yen are bought
back as investors unwind positions in trades that entail higher
risk but also higher potential return.
The euro fell 0.7 percent to $1.1537 EUR= . The single
currency had set a seven-month peak of $1.1715 on Monday, when
it had shot up from a low of $1.1370.
"There are still two-way flows, with demand for buying the
dollar on dips. Some may see the beginnings of a Lehman
crisis-like situation. I don't think sentiment is that bad, but
the next few days could determine how it pans out," said Bart
Wakabayashi, head of foreign exchange at State Street in Tokyo.
The Australian dollar rose 0.8 percent to $0.7215 AUD=D4 ,
having pulled up from a six-year trough of $0.7044 plumbed on
Monday.
(Editing by Eric Meijer and Jacqueline Wong)