* Nikkei up 3 pct, supporting Japanese investor risk appetite
* RBA chief says Australian interest rates "pretty low"
* Investors await U.S. housing data
By Rika Otsuka
TOKYO, May 19 (Reuters) - The yen dipped against major currencies on Tuesday, extending losses made the previous day, as a rally in Tokyo shares supported risk appetite, in turn leading investors to shift funds to riskier currencies.
The Australian dollar rose towards recent seven-month peaks against the yen and dollar, underpinned after Reserve Bank of Australia Governor Glenn Stevens said Australian interest rates were "pretty low".
"The yen remains vulnerable as firmness in stocks bolsters risk appetite, with people encouraged to buy higher-yielding currencies such as the Australian dollar against the yen," said Tsutomu Soma, a senior manager in the foreign securities department at Okasan Securities.
The dollar edged up 0.1 percent from late U.S. trade to 96.37 yen. The greenback had gained more than 1 percent against the Japanese currency in U.S trade on Monday as stocks posted hefty gains.
Tokyo's Nikkei share average rose 3 percent at one point after Wall Street climbed on hopes the economic slump is easing.
But analysts said that some market players were still unsure of the outlook for the global economy.
"The market sentiment changes day by day and risk appetite has been on and off recently," said Kazuyuki Kato, treasury department manager at Mizuho Trust & Banking.
If U.S. shares maintain their rally later on Tuesday, it could prompt investors to sell currencies that are perceived to be less risky, he said.
The U.S. currency hit a two-month low of 94.55 yen on Monday on trading platform EBS but rebounded on remarks from Japan's vice finance minister, Kazuyuki Sugimoto, that he was watching moves in the foreign exchange market carefully.
His comments rekindled intervention fears among market players, pushing the yen down across the board, although few traders expected any imminent action beyond verbal intervention.
The yen had rallied last week as optimism over the global economic outlook faded on weak U.S. and European data, but traders said Monday's jump in the dollar and cross/yen could be explained by dollar and cross/yen short-covering or closing of broad yen-buying positions.
The euro was little changed from late U.S. trade at $1.3563. It gained about 0.5 percent against the U.S. currency on Monday on higher share prices that supported expectations that the worst has passed in the global recession.
The European single currency inched up 0.3 percent to 130.82 after a jump of 1.7 percent the previous day.
The Australian dollar rose 0.2 percent to $0.7665 after climbing more than 2 percent on Monday.
The comments from Stevens affirmed expectations that the RBA is near the end of its easing cycle, and that rates will be held steady for now. The central bank has cut rates by 425 basis points since September to a record low of 3 percent.
Minutes of the RBA's May 5 policy meeting showed on Tuesday that the central bank would monitor tentative signs of an improvement both in the global economy and at home before deciding on the next move in interest rates.
The Australian dollar climbed 0.5 percent to 73.89 yen.
Investors will look to U.S. housing starts data at 1230 GMT for evidence to support optimism about the prospects for an economic recovery.
"Stronger housing figures are likely to boost stocks, further prompting investors to dump long yen positions," said Osamu Takashima, chief currency analyst at Bank of Tokyo-Mitsubishi UFJ.
A Reuters poll showed economists expect housing starts to have risen to 0.52 million in April from 0.51 million in March. Building permits are expected to have increased to 0.53 million from 0.516 million. (Additional reporting by Kaori Kaneko; Editing by Joseph Radford)