* U.S.-China trade dispute dents risk appetite
* Dollar index pulls back from 1-yr low
* Yen hits 7-mth high of 90.18 yen vs dlr, retreats
(Recasts, updates prices; changes dateline, previous LONDON; changes byline)
By Nick Olivari
NEW YORK, Sept 14 (Reuters) - The dollar gained against a basket of six currencies on Monday for the first time in seven sessions as the United States and China became embroiled in their latest trade dispute.
On Friday, U.S. President Barack Obama announced safeguard duties on tire imports from China that would put additional duties of 35 percent on Chinese-made tires from Sept. 26.
China struck back, announcing its own anti-dumping investigations of motor vehicles and chicken products from the United States.
The row raised concern that a fragile economic recovery globally could be derailed, adding to the dollar's allure as a safe haven while keeping investors wary of risky positions.
Some analysts said the row also provided an opportunity for investors to sell some positions that may have become over extended after last week's rally in currencies considered to be higher-risk, including the euro, sterling and the high-yielding Australian and New Zealand currencies.
"The escalation of protectionism from the U.S. will concern many, particularly due to its potential impact on the global recovery," said Camilla Sutton, a currency strategist at Scotia Capital in Toronto in a note to clients. "For today, the impact has been a move towards risk aversion."
In early New York trade, the euro was down 0.1 percent on the day at $1.4549. It hit a 2009 peak on Friday. The dollar index was at 77.001, up 0.5 percent on the day.
But while the latest tension between Washington and Beijing lowered risk demand on Monday, it is unlikely to put a lasting hole in the market's appetite for risk over the longer term, said Paul Robson, currency strategist at RBS in London.
Markets shrugged off euro zone industrial production data, which posted slightly lower than forecasts, and employment data for euro zone which was down 0.5 percent in the second quarter versus the previous three months.
Separately, the European Commission forecast the euro zone economy to contract by 4.0 percent this year -- the same as it forecast in May.
AUSSIE, KIWI FALTER
The Australian dollar fell 0.7 percent to $0.8573, retreating from Friday's one-year high. The New Zealand dollar slid 1.1 percent to $0.6987, hurt on an unexpected fall in New Zealand retail sales for July.
But many analysts said the dollar's rebound was temporary, as the greenback would be undermined by falling Treasury yields and a view it was replacing the yen as a funding currency.
Talk of Asian central banks diversifying from U.S. dollars into other currencies and assets, including gold, had also contributed to dollar-selling last week.
At the same time, the dollar's sell-off last week has left the market with its biggest net short position in the currency in more than a year, and some analysts said this may keep investors cautious about pushing the dollar much lower for now.
On Monday, the dollar rose 0.2 percent 90.93 yen, pulling back from an early fall to 90.18 yen, its lowest since February.
Traders said large options barriers around 90.00 yen and 90.50 yen would likely slow the yen's gains versus the dollar.
Japan's Vice Finance Minister Yasutake Tango said on Monday officials are watching currency moves closely but declined to comment on specific levels. (Additional reporting by Naomi Tajitsu in London) (Reporting by Nick Olivari; Editing by Theodore d'Afflisio)