* Dollar drops vs major currencies as U.S. stocks recover
* Yen hits one-month high earlier on China stock decline
* Sterling falls as some BoE members wanted bigger QE (Updates prices, adds quote, details)
By Wanfeng Zhou
NEW YORK, Aug 19 (Reuters) - The dollar fell against the euro and a basket of currencies on Wednesday as a rebound on Wall Street reduced safe-haven demand for the U.S. currency.
But the dollar weakened against the yen, although it came off the day's worst levels as a sharp slide in China's stock market overnight raised concerns about the global economic outlook and boosted the Japanese currency's allure.
A recovery in U.S. stocks and a more than 4 percent jump in oil prices to above $72 a barrel lifted commodity currencies, while the euro pushed above $1.42, on track for its biggest daily rise against the dollar in more than two weeks.
"Currencies have been tracking sentiment" in the equity and oil markets, said Brian Kim, currency strategist at UBS in Stamford, Connecticut. "That's why we've seen the dollar come off."
In recent months, the dollar has tended to fall as stock prices and risk appetite rise, giving investors less impetus to buy dollars as a safe haven.
In late New York trading, the euro rose 0.7 percent to $1.4236, well off a session low of $1.4081, according to Reuters data.
In the absence of fresh economic data, currencies were mostly following stock prices for direction. With trading desks thinned out by summer holidays, analysts said moves were exaggerated.
"These are some of the most illiquid market conditions you will see all year, with probably about 25 percent of normal market volume, so this has to be put into that context," said Michael Woolfolk, senior currency strategist at the Bank of New York-Mellon in New York.
The dollar hit a one-month low against the yen and was last down 0.7 percent at 93.98 yen. The euro was unchanged at 133.82 yen, well above its one-month low of 132.16 yen.
PIMCO, BUFFETT COMMENTS WEIGH
The ICE Futures U.S. dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.5 percent on the day.
Comments from a portfolio manager at Pacific Investment Management Co and from billionaire investor Warren Buffett also weighed on the dollar, said Ronald Simpson, managing director of global currency analysis at Action Economics in Tampa, Florida.
Curtis Mewbourne of PIMCO wrote on the firm's Website that the dollar is losing its status as a reserve currency and will likely continue to fall versus other currencies.
"We are clearly seeing a loss of status for the U.S. dollar as a store of value even in the absence of a single viable alternative."
Writing in The New York Times on Wednesday, Buffett warned that the "gusher of federal money" aimed at rescuing the U.S. economy will in the long run undermine the dollar.
Excess spending in Britain has also hit sterling hard of late. The currency fell sharply earlier after minutes from the Bank of England's last meeting showed some board members, including Governor Mervyn King, wanted an even bigger expansion in the bank's asset-purchasing program.
Sterling last traded down 0.1 percent at $1.6538, having recovered from a $1.6372 session low. Asset purchases require the BoE to print money, which some investors fear may lead to an oversupply of sterling and eventual inflation.
Among commodity currencies, the Australian dollar rose 0.4 percent to US$0.8290, while the U.S. currency fell 0.6 percent to C$1.0952 versus its Canadian counterpart. (Additional reporting by Steven C. Johnson; Editing by James Dalgleish)