* Dollar/yen edges higher, pulls away from 7-mth low
* 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 against
the yen on Tuesday, pulling up from a slide to seven-month lows
the previous day, but the outlook remained clouded by worries of
a China-led slowdown in global growth.
Traders said a rise in U.S. stock index futures and a brief
rebound in Japanese stocks helped spur dollar-buying against the
yen earlier in the day, with the dollar rising to 120.11 yen at
one point.
There was also talk of dollar-buying by Japanese players.
The greenback had tumbled 4 percent against the yen over the
two previous days as the turmoil in global financial markets
whittled down bets that the Federal Reserve will raise interest
rates in September.
The dollar rose 0.8 percent to 119.30 yen JPY= , after
having tumbled 2.9 percent on Monday for its biggest one-day
fall in five years.
The dollar pared its gains as Japanese equities fell in the
afternoon, with the benchmark Nikkei index .N225 closing
sharply down by 4 percent.
While the dollar has pulled up from Monday's trough of
116.15 yen, its lowest level since mid-January, it is still well
below levels around 123 yen to 124 yen where it had been 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.
Shanghai shares slumped 6.1 percent .SSEC after plunging
more than 8 percent on Monday.
Besides receding expectations for a Fed rate rise in
September, the dollar has also come under pressure recently 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 0.6 percent to $1.1552 EUR= . The single
currency had set a seven-month peak of $1.1715 on Monday.
Heng Koon How, senior FX strategist for private banking and
wealth management at Credit Suisse (SIX:CSGN) in Singapore, said Japanese
and euro zone policymakers were unlikely to tolerate further
sharp rises in the euro and yen as they could undermine their
efforts to reflate their economies.
"I would expect verbal intervention to heat up, should euro
head higher towards $1.20 or dollar/yen trades on a sustained
basis below 115," Heng said.
Japanese Finance Minister Taro Aso on Tuesday warned market
players against pushing up the yen too much further, saying that
its spike against the dollar overnight was "rough" and
undesirable for the economy. ID:nL4N110073
Against a basket of six major currencies, the dollar stood
at 93.701 .DXY , holding above Monday's seven-month low of
92.621.
"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 0.5 percent to $0.7193 AUD=D4 ,
having pulled up from a six-year trough of $0.7044 plumbed on
Monday.
(Editing by Eric Meijer and Jacqueline Wong)