* Yen holds ground in subdued session after earlier gains
* China’s yuan falls sharply on suspected PBOC moves
* U.S. data mixed, nudges U.S. yields lower
By Ian Chua and Shinichi Saoshiro
SYDNEY/TOKYO, Feb 26 (Reuters) - The yen steadied on Wednesday as investors gave the dollar a wide berth on the back of a decline in U.S. Treasury yields and as it drew bids amid risk aversion, highlighted by concerns about China’s economic growth.
The dollar index was at 80.169, after going as low as 80.016 on Tuesday with some traders pointing to mixed U.S. data as a reason for its fall.
After going as low as 102.01 yen the previous day the dollar stood at 102.33 yen, well below a three-week high above 102.80 yen hit on Friday.
The dollar hit the three-week high after upbeat jobs-related data, but recent indicators on the whole have painted a bleaker picture for the U.S. economy and weighed on the greenback.
Asian markets were again focused on China, where the yuan has seen a surge in volatility on suspected moves by the central bank to curb speculative betting on the currency ahead of reforms.
The dollar was last at 6.1270 compared with levels closer to 6.0600 just a week ago.
Spot yuan has entered a dramatic weakening cycle in recent weeks, guided downward by a series of weak fixings by the central bank, with additional momentum added to the slide by the unwinding of yuan positions by Chinese banks.
Many market watchers see the move as a prelude to a widening of the yuan’s trading band and believe the currency’s longer-term uptrend remains intact, despite recent data showing the economy is losing steam.
“Chinese macro economic risk is a factor capping the dollar against the yen,” said Shusuke Yamada, chief Japan currency strategist at Merrill Lynch Japan Securities.
“Macro economic risks from the U.S., China and Japan have grown significantly. That said, such risks are unlikely to fully materialise until key data releases in April, and the dollar is likely to be range bound until then,” Yamada said.
While much of the recent soft U.S. data has been blamed on bad weather, the next few months should provide firmer evidence of whether the world’s largest economy is merely steering through a minor blip or facing bigger hurdles.
“The overall impression of a soft first quarter is likely to remain very much in place, keeping U.S. yields low and anchored and leaving currency market participants wary of adding long USD exposure,” analysts at BNP Paribas wrote in a client note.
Consumer confidence drifted lower this month and a measure of regional manufacturing took a dive, offsetting solid gains in home prices.
The euro firmed a touch to $1.3741 but was still well within a slim $1.3685/1.3774 range seen for a week now.
Against the yen, the common currency stood at 140.60 , extending its pullback from a one-month high of 141.29 touched on Friday.
The Australian dollar, a liquid proxy for China plays, last traded around 90 U.S. cents, having eased a third of a cent overnight.
Traders expect little further action in Asia amid a dearth of economic news. In Europe, a report on German consumer morale will be released along with Italian wage inflation.