* Market cheers opposition win in Japanese vote
* U.S. Midwest business on cusp of growth in August
* Chinese stocks drop 6.7 percent, stoking risk aversion
* Dollar gains versus Aussie, Canadian dollars
(Updates with reaction to U.S. data, adds comments, updates
prices)
By Wanfeng Zhou
NEW YORK, Aug 31 (Reuters) - The yen rose to a 7-week high
against the dollar and gained versus other currencies on Monday
buoyed by a decisive opposition victory in Japanese elections
and as declines in global equities stoked risk aversion.
A 6.7 percent slump in Chinese stocks sent investors
flocking to the yen for safety. The U.S. dollar, another
safe-haven currency, also rose against perceived higher-risk
currencies, such as the Australian dollar.
"There's a bit of risk aversion in the market this morning,
really on the back of (the fall in) Chinese equities," said
Camilla Sutton, senior currency strategist at Scotia Capital in
Toronto.
A landslide win Sunday by the Democratic Party of Japan
(DPJ) sparked hopes that new policies will support consumer
spending in an economy trapped in deflation and haunted by a
weak growth outlook. For details, see []
While the outcome lifted the Japanese currency, traders
said gains could be limited on jitters over what a new
government may herald.
The dollar gave up gains versus the euro to hit session
lows after data showed business activity in the U.S. Midwest
picked up at a faster pace than expected in August, although
the details of the report were less upbeat. The Institute for
Supply Management-Chicago business barometer rose to 50.0 from
43.4 in July. []
"Fifty is the midpoint for growth or contraction, so that's
important. But the August number was likely affected by the
'Cash for Clunkers' program," said Jacob Oubina, currency
strategist at Forex.com in Bedminster, New Jersey.
He added that the employment component of the index only
rose slightly and is still well below the growth level of 50.
"So that's still a concern."
In mid-day New York trading, the dollar was down 0.7
percent at 92.79 yen <JPY=>, having earlier hit a low of 92.53
yen, according to Reuters data, its weakest level since
mid-July.
The euro lost 0.5 percent to 133.08 yen <EURJPY=R>, while
the single European currency recouped earlier losses against
the dollar to trade 0.2 percent higher at $1.4336 <EUR=>.
Trading was quiet, however, with U.K. markets closed for a
public holiday. The focus is on key events later in the week,
including a European Central Bank policy meeting on Thursday
and U.S. non-farm payrolls figures due on Friday.
(Additional reporting by Steven C. Johnson; Editing by
Jeffrey Benkoe)
