* Dollar hits 7-month low vs yen at 86.97 yen
* Euro gains 2 pct, helped by ECB 6-day tender results
* U.S. economic reports stoke investor caution
* Weaker China PMI raises global growth concerns
(Recasts; adds details, updates prices)
By Nick Olivari
NEW YORK, July 1 (Reuters) - The dollar fell to a
seven-month low against the yen on Thursday as economic reports
in both the United States and China added to investors'
uncertainty about the global economic recovery.
The euro, however, rallied broadly after European banks
borrowed less money than expected from a European Central
Bank's tender, cooling concerns over euro zone banks' funding
issues.
The dollar slid against the yen after reports on U.S.
manufacturing, claims for jobless benefits and pending home
sales added to concern about both the U.S. and global recovery.
For full story, see []
Chinese manufacturing PMI data showed slower growth in
June, heightening concerns over the global economic recovery
and weighing on high-yielding currencies. []
"Weaker than expected Chinese manufacturing data overnight
fanned concerns about the outlook for the world's third largest
economy and engine of global recovery," said Omer Esiner, chief
market analyst at Commonwealth Foreign Exchange, Inc in
Washington.
"Unlike the greenback, the yen did benefit from the broad
pullback in risk appetite, rising to a new seven-month peak
against the U.S. dollar."
Midway through the New York session, the dollar was down
1.1 percent against the yen at 87.44 after going as low as
86.97, according to Reuters data <JPY=>. The low on electronic
trading platform EBS was 86.96, its weakest in seven months
<JPY=EBS>.
The euro <EUR=> advanced 2 percent to $1.2475, with the
high at $1.2485, according to Reuters data, extending gains for
a second day and rebounding from a two-week low around $1.2150
hit earlier in the week <EUR=EBS>. It was the biggest one-day
advance since May 19 at current prices.
The euro zone currency was also supported by Madrid's
ability to sell five-year bonds following Moody's Investors
Service decision on Wednesday to put Spain's sovereign rating
on review for a possible downgrade. []
"A successful Spanish bond auction and lower than expected
demand for short-term loans from the European Central Bank
alleviated liquidity concerns in the 16-member bloc and buoyed
the euro," Esiner said.
Against the Swiss franc, the euro was last up 1 percent at
1.3318 francs <EURCHF=> after earlier bottoming at 1.3073 on
EBS <EURCHF=EBS> -- its weakest since the single currency's
1999 launch. The dollar was down 0.9 percent against the franc
<CHF=>, earlier touching its lowest since mid April.
Thursday's six-day ECB tender led to speculation that
European banks may not be as desperate for funds as had been
earlier thought, helping the euro to hold gains.
The ECB tender followed an offer of three-month funding the
previous day, which received less bids than expected,
indicating banks were fairly well positioned to repay ECB's 442
billion euros emergency loans on Thursday.
Against the yen, the euro was up 0.9 percent at 109.17 yen,
recovering from an 8-1/2-year low hit this week <EURJPY=>.
Investors hoping for positive signs of U.S. recovery were
disappointed.
The U.S. manufacturing sector grew in June for an eleventh
straight month but at a slower rate than expected, according to
an industry report. June marked the second straight month of
slower growth. []
Also on Thursday, contracts for pending sales of
previously-owned homes plunged a record 30 percent in May, far
more than expected, after a tax credit expired the prior month,
a survey from the National Association of Realtors.
[]
An earlier report showed the number of U.S. workers filing
new applications for unemployment insurance rose unexpectedly
last week. []
Investor focus is now turning to the U.S. non-farm payrolls
report for June set for release on Friday.
"Investors are very wary of over-exposure to the dollar
ahead of such a key event" Friday, said Commonwealth's Esiner.
