* Yen rallies broadly, hits 7-week high vs dollar, euro
* European shares fall 0.5 pct, risk aversion continues
* U.S. jobs, FOMC minutes awaited
(Updates to midsession, changes byline)
By Emelia Sithole-Matarise
LONDON, Sept 2 (Reuters) - The yen rallied broadly on
Wednesday, hitting a seven-week high against the dollar and
other major rivals as weaker shares stoked risk aversion before
a raft of U.S. economic data later in the day.
At the same time, a broad climb in the Australian dollar
bucked the day's risk-selling move after surprisingly strong
economic growth data for Australia suggested that interest rates
in the country may rise soon.
An overall chill in risk demand kept the euro near a
two-week low against the dollar, with the single currency
brushing off figures confirming a 0.1 percent quarterly
contraction in the euro zone economy in April-June.
Traders awaited data on U.S. jobs, factory orders and
productivity, and minutes from the Federal Reserve's policy
meeting last month, to see whether the U.S. economy continues to
improve before cranking up risk demand.
"The yen is supported with the tone currently being equities
under pressure, commodities becoming extremely vulnerable," said
Ian Stannard, senior currency strategist BNP Paribas.
"And we are seeing the Chinese equity market give back 50
percent of the gains made earlier in the year having negative
implications for the commodity markets. This obviously is going
to have knock-on effects elsewhere."
The dollar <JPY=> was trading 0.2 percent down on the day at
92.68 yen by 1119 GMT, having fallen to 92.38 yen earlier
according to electronic trading platform EBS, its lowest since
mid-July.
The yen rose against other currencies considered to be
higher risk, also hitting seven-week highs against the euro
<EURJPY=R> and sterling <GBPJPY=R>.
The latest rally in the safe-haven yen coincided with a jump
in the U.S. CBOE Volatility Index <.VIX> measure of risk
aversion, which on Wednesday hit 29.23, its highest since
mid-July.
European shares <> fell 0.5 percent, tracking a slide
in many Asian stock markets after lingering concerns about the
health of U.S. banks kept a lid on U.S. stock futures.
Traders in Tokyo said yen gains were being driven by
short-term speculators building long yen positions ahead of U.S.
non-farm payrolls on Friday. They noted a risk that a weak
reading may drive the dollar/yen down to the 90 yen mark.
The yen was likely to remain supported on positive inflows
and comments from a key Japanese Democratic Party lawmaker
suggesting the new government might take a far less
interventionist approach in markets, strategists said.
The euro <EUR=> was 0.1 percent up at $1.4220, near a $1.4177
touched on Tuesday, its lowest since Aug. 19.
The euro is seen gaining little impetus from the European
Central Bank's policy decision on Thursday widely expected to
keep interest rates at 1.0 percent with ECB President
Jean-Claude Trichet likely to caution against growing talk of a
full-blown euro zone economic recovery.
AUSSIE SHINES
The Australian dollar <AUD=D4> rose 0.7 percent to $0.8317
after data showed the Australian economy grew by 0.6 percent on
the quarter and the year in April-June, exceeding forecasts.
[]
Strong U.S. data has stung the dollar in past months on the
logic that a stronger U.S. economy helps to boost risk demand.
But ahead of the raft of U.S. data this week culminating
with non-farm payrolls, some analysts said more aggressive signs
of recovery may boost the dollar, as would Fed minutes showing
that central bank policymakers are actively planning an exit
from quantitative easing.
"If we get better U.S. data and/or some acknowledgement from
the Fed that conditions aren't warranting a continuation of
asset purchases, that may well be something that could give the
dollar some traction," said Jeremy Stretch, currency analyst at
Rabobank in London.
(Additional reporting by Naomi Tajitsu; Editing by Andy Bruce)
