* Paper says H2 China growth could be much weaker
* Aussie tumbles 0.8% vs yen, dollar down 0.3% vs yen
* Growth worries keep dollar index near two-month lows
* Asia to eye Chinese data, weak numbers a risk for Aussie
By Hideyuki Sano
TOKYO, July 15 (Reuters) - The Australian dollar tumbled on Thursday after an official Chinese paper reported the country's economy may slow more sharply than expected in the second half of this year, urging Beijing not to tighten its policy further.
The report, a few hours before the official announcement of a set of Chinese economic data, prompted selling in high-yielding currencies, such as the Australian dollar, against the Japanese yen.
The spectre of slower growth in China rekindled worries that have beset financial markets since last month that the global economy may be losing an engine at the same time as much of the developed world is reducing fiscal stimulus.
"A lot of the data I am looking at - things like real time port activity - has slowed materially and this should show up in industrial production today," Robert Rennie, chief currency strategist at Westpac in Sydney wrote on the Reuters Dealing Room.
"I find it hard to believe that the Australian dollar should be doing well with very real signs of rising concern on U.S. data plus Chinese softening."
The U.S. Commerce Department reported that U.S. retailers' June sales declined 0.5 percent -- more than twice the 0.2 percent drop forecast by economists polled by Reuters.
That has sapped some of the optimism triggered by strong U.S. corporate earnings being released this week, leaving the U.S. dollar near its two-month low on a basket of currencies.
The dollar index stood at 83.48, not far from a two-month low of 83.205 hit on Wednesday following weak U.S. retail sales numbers for June and dovish Federal Reserve minutes from its last meeting.
The index is holding just above support at around 83.15, the 38.2 percent retracement of the its rise from a low of 74.17 in November 2009 to a high of 88.59 on June 8.
The Australian dollar fell about 0.4 percent to $0.8795, slipping further from a two-month high of $0.8871 hit on Wednesday. Against the yen, it shed 0.8 percent to 77.51 yen.
The U.S. dollar eased about 0.3 percent against the yen to 88.14 yen, having slid 0.5 percent on Wednesday.
Traders said if the Chinese data came in weaker than expected, it could spark fresh demand for the Japanese currency and the yen could rise above the 88 per dollar level.
The yen usually gains when there is a spike in risk aversion and fears of a global slowdown drives investors to safe-haven assets.
A slew of Chinese data, including consumer inflation for the year to June, industrial product numbers, retail sales, investment data for June and second-quarter gross domestic product is due at 0200 GMT.
Any hint of a slowdown in China could see profit-taking in growth-linked currencies like the Australian and the New Zealand dollars, though some traders said bad news may have already been factored in.
"I think the market has already priced in weak readings after all the market's moves this morning, so additional reaction may be limited," said a trader at a Japanese bank.
The euro slipped 0.2 percent to $1.2720, off a high of $1.2778 struck on Wednesday, its highest since early May. The single currency pared some of its gains, although sentiment was holding up given recent successful bond auctions in Portugal, Germany and Greece.
The NZ dollar fell 0.5 percent at $0.7200 after hitting a two-month high of $0.7254 on Wednesday.
(Additional reporting by Anirban Nag and FX analyst Krishna Kumar in Sydney; Editing by Joseph Radford )