* Yen backs off highs vs dollar and euro
* Aussie gains after Q2 GDP as rate hike expectations rise
* Shanghai shares up, but most other regional stocks fall
By Satomi Noguchi
TOKYO, Sept 2 (Reuters) - The yen retreated from a seven-week
high against the dollar and euro on Wednesday, pushed back after
economic growth in Australia supported the case for an early rise
in rates and powered the Australian dollar higher.
Most regional shares fell as concerns about the financial
sector outweighed data showing growth in the U.S. manufacturing
sector and dragged Wall Street <.SPX> down, sending the
low-yielding yen up against riskier currencies initially.
But the Japanese currency later gave up a chunk of its gains
after data showed Australia's economic growth for the second
quarter was stronger than expected, helping the Aussie recoup its
losses versus the yen and the dollar and rise. []
Shares in Shanghai <> also held up better than others in
the region, putting a brake on yen buying by short-term players.
"It's stabilisation for now," said Tomoko Fujii, senior
currency strategist at Bank of America Securities-Merrill Lynch.
"But yesterday's very heavy topside despite the good ISM
(manufacturing) numbers was disappointing. People thought
financial sector concerns were more important than economic
data."
The dollar came back to stand unchanged from late U.S. levels
at 92.87 yen <JPY=> after hitting a seven-week low at 92.51 yen
on trading platform EBS.
Traders said there was talk of automatic sell orders below
92.50 yen and a break there was likely to open the door to July's
low of 91.73.
They also said short-term speculative players, drivers of the
market at the moment, were building long yen positions, with the
risk that a worse-than-expected U.S. employment report on Friday
could drive the dollar/yen down to the 90 yen mark.
The euro <EUR=> weakened 0.1 percent on the day to 132.00 yen
<EURJPY=R>, having hit 131.47 yen earlier, its lowest since
mid-July.
Against the dollar it was flat at $1.4220 <EUR=> after
shedding 0.8 percent on Tuesday and hitting a two-week low of
$1.4177.
Traders said concerns were building about what happens to the
U.S. economy once stimulus effects start to fade, and that was
fuelling concerns about the health of the financial sector.
"Optimism about an economic recovery had put a lid on worries
about the financial sector, but these are reviving as investors
now see a greater chance of a slowdown after the policy-led
rebound," said the chief FX manager for a Japanese trust bank.
Trader said some players were waiting on the sidelines ahead
of Friday's U.S. jobs report and a private sector jobs survey due
later on Wednesday.
The Australian dollar <AUD=D4> fell more than 2 percent in
Tuesday's sell-off but it erased some of those losses after the
GDP data and gained 0.5 percent on the day to $0.8317.
Against the yen it came back from a six-week low at 76.37 yen
to rise 0.6 percent on the day to 77.17 yen <AUDJPY=R>.
Australia's economy grew 0.6 percent on the quarter, its
fastest pace in more than a year, as aggressive policy stimulus
drove a revival in consumer and business spending, encouraging
investors to think there is still a case of an interest rate hike
by year-end.
"This was maybe facilitated by inventory build but domestic
demand was OK so the rebound of the Aussie today is justifiable,"
Fujii said.
(Additional Reporting by Anirban Nag in Sydney and Charlotte
Cooper in Tokyo; Editing by Hugh Lawson)
