FOREX-Yen rises as China's data disappoint, US stocks fall

* Yen gains on rising risk aversion
* Aussie, kiwi slide as shares fall
* Dollar holds most gains, traders await FOMC
(Adds comments, details, changes byline)
By Vivianne Rodrigues
NEW YORK, Aug 11 (Reuters) - The Japanese yen rose broadly on Tuesday as investors bought the low-yielding currency as U.S. stocks declined and amid rising risk aversion after disappointing economic data from China.
China reported below-forecast growth in factory output and investment, reminding markets that the world's third-largest economy is not yet back on a solid footing. (For details, see [ID:nPEK328668]).
The news also added to the currency woes of the so-called commodity-bloc countries that supply raw materials to China, such as Australia and Canada.
The dollar traded in a tight range, swinging between gains and losses against a basket of currencies and as investors awaited a policy statement from the Federal Reserve and speculated whether strong U.S. data would support the currency going forward.
U.S. jobs data last week boosted expectations for higher U.S. interest rates by early 2010, but with a Fed announcement scheduled for the conclusion of a two-day meeting Wednesday, some dollar investors are choosing to wait rather than continue to buy.
A drop in U.S. and European stocks also prompted traders to sell currencies seen as higher risk versus the dollar and the yen.
"Chinese economic news is likely playing a part in today's forex market activity," said Nick Bennenbroek, head of currency strategy at Wells Fargo Bank in New York. "And with China seen as the global economy's main growth engine during the early stages of recovery, the disappointment (with the data) is weighing on equities and on the commodity-based and emerging currencies."
Wells Fargo expects further weakness in commodity and emerging markets currencies in the near term.
In afternoon trading in New York, the dollar was down 1.3 percent at 95.84 yen JPY=, off an eight-week high of 97.79 yen set last week on electronic trading platform EBS. The euro was down 1.1 percent against the yen at 135.74 yen EURJPY=R.
Technical currency analyst James Chen at FX Solutions in Saddle River, New Jersey, said in a note that the move lower in euro/yen after recent sharp gains may pave the way for a further drop to the 131.00 price region.