* Dollar extends losses, hits 1-year low vs currency basket
* Euro/dlr hits 9-month high, dollar/yen plumbs 7-mth low
* Fujii: Strong yen has merits for Japanese economy (Adds comment, detail, updates prices)
By Nick Olivari
NEW YORK, Sept 16 (Reuters) - The dollar slumped to a one-year low against major currencies on Wednesday as a recovery in the global economy encouraged investors to look for higher-returning assets.
The euro rallied to a nine-month high, a move analysts said reflected the view investors shunned the dollar as a safe haven.
The yen rallied to a seven-month high against the beleaguered dollar after Japan's incoming finance minister said a strong yen had advantages for the nation's economy.
"Risk appetite is still up on expectations of a global recovery after big data like (U.S.) retail sales yesterday," said Win Thin, a currency strategist at Brown Brothers Harriman in New York.
A report on Tuesday showed U.S. retail sales rose at their fastest pace in 3-1/2 years in August.
Midway through the New York session, the euro traded at $1.4684, hovering 0.2 percent higher on the day.
The dollar index, which tracks its performance against a basket of six major currencies, fell as low as 76.187, its weakest level in a year. It last traded at 76.377, down 0.2 percent on the day.
"The general dollar-selling trend remains in place," said Lauren Rosborough, senior currency analyst at Westpac in London, noting that traders were focused on $1.4720, above which would be the euro's highest since September 2008.
Some investors were initially fazed by an increase in the net capital outflow from the United States as seen in the Treasury Department's Treasury International Capital (TICS) flows report. Outflows for July swelled to $97.5 billion from a revised outflow of $56.8 billion in June.
"The headline number certainly paints a bit of a dark picture with regard to overall demand for U.S. assets," said Omer Esiner, a senior market analyst at Travelex Global Business Payments in Washington. "But I think the silver lining of this number is that we still see healthy demand from foreign central banks for U.S. Treasuries. In fact, both Japanese and Chinese holdings of U.S. Treasuries increased."
YEN RALLIES
The dollar fell 0.1 percent on the day to 90.90 yen though it went as low as 90.10 yen, according to Reuters data. The dollar earlier plumbed its weakest level against the yen since mid-February after incoming Finance Minister Hirohisa Fujii said he was opposed to currency intervention if movements were gradual, while adding that current moves were not rapid.
"The comments suggest the new government is not as keen to interfere in the market as the old one was," said Johan Javeus, chief currency strategist at SEB in Stockholm. "It seems this has given a go ahead signal to the market that it's OK for the yen to strengthen."
Still, he added Fujii's comments that he opposed currency intervention if movements were not rapid suggested the new government, like the old one, remained concerned with the speed of yen appreciation
Analysts have said traders remain cautious about pushing the yen too high due to lingering concerns Japan may act to stem the yen's strength, as they did in a massive intervention campaign in 2003-2004.
Such concerns may limit yen gains around 87 yen, a level hit earlier this year for the first time since 1995.
Market participants said traders were pushing dollar/yen lower in an attempt to test 90.00 yen, which was believed to be lined with options-related barriers.
A separate U.S. government report showing a rise in U.S. consumer prices had limited impact on trading and was soon overshadowed by later reports.
The Labor Department said its closely watched Consumer Price Index rose 0.4 percent in August, after having been flat in July, a touch above expectations for a 0.3 percent gain. (Additional reporting by Naomi Tajitsu in London) (Reporting by Nick Olivari; Editing by Kenneth Barry)