FOREX-Dollar gains vs yen on easing Syria tensions, China data
* Safe-haven yen slips as risk of strike on Syria diminishes
* Dollar stays under pressure with Fed policy outlook unclear
* Next week's Fed meeting main focus for markets
By Wanfeng Zhou
NEW YORK, Sept 10 (Reuters) - The dollar rose to a near seven-week high against the yen on Tuesday as easing tensions over Syria and encouraging Chinese economic data eroded demand for the safe-haven Japanese currency.
The yen also weakened to a 3-1/2-month low against the euro, while the higher-yielding Australian and New Zealand dollars rallied as investors' appetite for risk increased.
Syria accepted a Russian proposal on Tuesday to give up chemical weapons and win a reprieve from U.S. strikes. The diplomatic initiative marks a sudden reversal after weeks in which the West appeared finally headed towards intervention in a two-and-a-half year old war.
Adding to the positive sentiment in financial markets, China reported stronger-than-expected industrial output and retail sales, reinforcing hopes the economy was stabilising after slowing for more than two years.
"If U.S. can indeed avoid a military confrontation in Syria, the downward pressure on dollar/yen could ease considerably and could push the pair towards the 100.50 level as the day proceeds," said Boris Schlossberg, managing director of FX strategy at BK Asset Management in New York.
The dollar rose 0.7 percent to 100.29 yen, after climbing to 100.37 yen, according to Reuters data, the strongest since July 25.
The euro gained 0.8 percent to 132.94 yen, having reached 132.98 yen, the highest since late May.
The yen also weakened after minutes of the Bank of Japan's August policy meeting released on Tuesday showed members were confident that the central bank's aggressive monetary stimulus was helping to lead to an economic recovery.
The dollar rose 0.1 percent versus the Swiss franc to 0.9336 franc, but it fell against the Australian and New Zealand dollars. The Aussie hit a near seven-week high and last traded at $0.9294, up 0.8 percent. The kiwi rose 0.5 percent to $0.8055.
The dollar index, which tracks the greenback versus a basket of six currencies, was little changed at 81.826.
Analysts said any moves in the dollar will likely be limited after disappointing jobs data released last Friday fuelled uncertainty about whether the Federal Reserve will start scaling back stimulus this month. The Fed holds a policy meeting next week.
A Reuters poll on Monday showed economists expect the Fed to announce a modest reduction in its $85 billion monthly asset-buying programme by some $10 billion.
San Francisco Federal Reserve Bank President John Williams said on Monday he has yet to make up his mind on supporting a reduction at the Fed's meeting next week.
"We will likely see a further consolidation in the dollar which remains weak after last week's softer payroll report. Markets will now look to next week's Fed meeting," said Marcus Hettinger, global FX strategist at Credit Suisse.
"They will probably taper but still remain quite cautious."
The euro was flat at $1.3249, and was trading close to Monday's peak of $1.3281, its highest since Aug. 29.
Strong technical support lies around $1.3220. Strategists, however, said the euro could suffer from a row in Italy over former leader Silvio Berlusconi, who has been convicted of fraud, that threatens to topple its ruling coalition government.