* Yen gains on rising risk aversion
* Aussie, kiwi slide as shares fall
* Dollar holds most gains, traders await FOMC
* Eyes on U.S. Treasury quarterly refunding ahead of Fed (Adds comment, details, updates prices)
By Nick Olivari
NEW YORK, Aug 11 (Reuters) - The yen gained against most major currencies on Tuesday as investors bought the low-yielding currency amid rising risk aversion after negative data from China earlier in the global session.
China reported below-forecast growth in factory output and investment, reminding markets that the world's third-largest economy is not yet back on a solid footing. The news also added to the currency woes of the so-called commodity-bloc countries that supply raw materials to China.
The dollar traded in a tight range, swinging between gains and losses against a basket of currencies as investors awaited a policy statement from the Federal Reserve and speculated whether strong U.S. data would support the currency going forward.
U.S. jobs data last week boosted expectations for higher U.S. interest rates by early 2010, but with a Fed announcement scheduled for the conclusion of a two-day meeting Wednesday, some dollar investors are choosing to wait rather than continue to buy.
High-yielding currencies fell as European and U.S. stocks fell, prompting traders to sell currencies seen as higher-risk versus the dollar and the yen.
Analysts said there were few market-moving events, and trading volumes were thin in the summer holiday season.
"The euro/yen is being driven by risk aversion, but this is only in yen buying, not in the dollar," said Greg Salvaggio, vice president at Tempus Consulting in Washington.
Midway through the New York session, the dollar was down 1.3 percent at 95.84 yen, off an eight-week high of 97.79 yen set last week on electronic trading platform EBS. The euro was down 1.4 percent against the yen at 135.35 yen.
The Australian dollar fell 1.1 percent to $0.8288, while the New Zealand dollar slipped 1.2 percent on the day to $0.6676. The U.S. dollar rose 1.2 percent against the Canadian dollar to C$1.1014.
The dollar index was little changed at 79.238, extending gains into the fourth day. It swung between 79.355 and 79.008.
"We're in consolidation mode right now as the anticipation builds for the Fed statement tomorrow afternoon," said Brian Dolan, chief currency strategist at Forex.com in Bedminster, New Jersey. "The Fed will acknowledge some better data, but also downplay the idea that an exit strategy will start soon."
The euro fell 0.1 percent to $1.4124, close to a one-week low around $1.41 hit on Monday. Traders saw support at the 40-day moving average around $1.4095.
Much of the euro's declines against the dollar was technical as the New York session opened after the euro fell below $1.4150, triggering stop-loss orders to sell, said John McCarthy, director of foreign exchange at ING Capital Markets in New York.
The market showed little reaction to German consumer price inflation, which was revised up to show a fall of 0.5 percent in July year-on-year, while the harmonized consumer price index posted its first annual drop since the index was introduced in 1995.
Investors also brushed off the Bank of Japan's decision to keep interest rates at 0.1 percent. BOJ Governor Masaaki Shirakawa said he saw no risk of a deflationary spiral in Japan.
FED AHEAD
The euro hit the day's high against the Swedish crown at 10.393 crowns, according to Reuters data in New York, after ratings firm Standard & Poor's cut sovereign credit ratings for Estonia and Latvia on Monday. Swedish banks are heavily exposed to the Baltic region, which is gripped by deep recession.
The dollar has held on to most of its post-payrolls gains, which has prompted some in the market to wonder if the trend to sell the dollar on strong economic data is nearing an end.
Some though, remained cautious as the dollar had a similar short-lived climb in early June, when a smaller-than-expected drop in payrolls also spurred speculation that U.S. interest rates would start to rise sooner than expected.
"The dollar is holding on to Friday's payroll-inspired gains, but it needs some fresh support to avoid sinking back as it did in June," said Chris Turner, head of FX strategy at ING in London.
The Fed is expected to keep rates steady at 0-0.25 percent on Wednesday, but paint a slightly brighter economic picture while dampening rate hike speculation. It is also likely to end its $300 billion Treasury purchases program, as scheduled.