(Corrects 3rd paragraph to show dollar and euro fell vs yen and
* Yen rises 2 pct versus dollar, euro as Nikkei tumbles
* Worries about Fed tapering QE, weak China PMI hit stocks
* Aussie hit hard by weak China data, fall in commodities
By Jessica Mortimer
LONDON, May 23 The yen vaulted to two-week highs
against the dollar and the euro on Thursday as a slide in
equities encouraged profit-taking on the safe-haven currency's
recent sharp falls.
Concerns U.S. monetary stimulus could be scaled back, after
testimony by Federal Reserve Chairman Ben Bernanke, and weak
Chinese data triggered a 7.3 percent plunge in Japan's Nikkei
share index, its biggest one-day drop in two years.
The dollar and the euro both fell more than 2 percent
against the yen, and lost 1 percent against the Swiss franc
, also seen as a safe haven.
The dollar slid to a two-week low of 100.83 yen,
having hit a 4-1/2 year peak of 103.74 yen after Bernanke told
Congress the Fed could "in the next few meetings take a step
down" in its bond buying.
Analysts said the dollar could drop further against the yen
if equities continued to fall. But they expected the trend of
yen weakness and dollar strength to remain given aggressive
easing in Japan and the prospect of tighter U.S. policy.
With the dollar up almost 20 percent this year, analysts
said the fall in equities provided the excuse for a correction.
"What's happened in currency markets is all linked to stocks
... Dollar/yen had got to a new high and investors were quick to
take profit on long dollar/yen positions," said Niels
Christensen, currency strategist at Nordea in Copenhagen.
"The correction has the potential to go further ... But
there is no risk of a dramatic fall and any move below 100
should be brief."
Some traders focused on Bernanke's caveats that the central
bank would need to see more improvements in the economy before
reducing stimulus, even though Fed minutes showed some
policymakers were willing to cut bond buying as early as June.
"The smart people who were long on the dollar/yen sold it at
103. On top of that, the Nikkei's fall meant people had to
unwind their FX hedges on equities and sell dollars," said a
trader at a major Japanese bank in Tokyo.
The yen's gains were most dramatic against the Australian
dollar, which tumbled more than 2 percent to a
seven-week low of 97.33 yen after data showed factory activity
shrank in China, Australia's biggest export market.
The Aussie was hit by a sharp slide in commodity prices
and fell around 1 percent against the U.S.
dollar to $0.9593, its lowest in nearly a year. It came close to
the June 2012 trough of $0.9581.
The euro slid to a two-week low of 129.945 yen,
having touched a 3 1/2-year peak of 133.82 yen on Wednesday.
The single currency was up 0.2 percent at $1.2883,
pulling away from a 6-week low of 1.2796 hit on May 17, helped
slightly by data showing the downturn across euro zone
businesses eased slightly this month.
But the data still pointed to another contraction in the
euro zone in the second quarter. Analysts expected the euro to
remain weak against the dollar given concerns the Fed will taper
its QE programme while the European Central Bank could ease
monetary policy further.
(Additional reporting by Sophie Knight in Tokyo, editing by