* Yen drops from 2-mth peak vs euro
* Investors bargain-hunt but caution on intervention grows
* Australia-China coal shipment row casts shadow over Aussie
By Rika Otsuka
TOKYO, July 9 (Reuters) - The yen slid on Thursday, falling from a five-month high against the dollar and a two-month peak versus the euro hit the previous day when doubts about the health of the global economy spurred risk aversion.
The dollar and the euro both fell more than 2 percent against the yen on Wednesday, posting their sharpest one-day drops since March, according to data from trading platform EBS.
In recent weeks, optimism about the global economy's recovery prospects has started to wane, prompting investors to trim holdings of riskier assets such as stocks while seeking the safety of government debt.
Dealers said the dollar's fall had been exacerbated by automatic sell orders triggered around 94.00 yen and loss cutting on options positions near 93.00. As the dollar fell below those levels, liquidity dried up, steepening the plunge.
But the dollar and other major currencies found some support on Thursday as Japanese importers and investors, including retail investors, hunted bargains in foreign currencies.
"Japanese players bought back overseas currencies because few fear a meltdown in the global economy as they did earlier in the year," said Tsutomu Soma, a senior manager of foreign securities at Okasan Securities.
"It is true that investors are less optimistic, especially after last week's U.S. jobs data," Soma said. "But even so, their views on the global economy are not as bad as recent abrupt moves in exchange rates might suggest."
The dollar rose 0.3 percent from late U.S. trade to 93.15 yen. It hit a five-month trough of 91.80 on EBS the previous day.
The euro climbed 0.4 percent to 129.50 yen after falling as low as 127.00 yen on Wednesday, its lowest since mid-May.
The euro was up 0.1 percent at $1.3901.
Speculators betting that a recent pullback in risky assets could provide the impetus for a further rise in the yen were also behind this week's hefty losses in dollar/yen and cross/yen.
"The dollar remains vulnerable as U.S. Treasury yields slid yesterday, narrowing the dollar's yield advantage over the yen," said Minoru Shioiri, a senior manager of forex trading at Mitsubishi UFJ Securities.
"But the greenback is unlikely to plunge against the yen during Tokyo trade as those who needed to cut long dollar positions have already dumped enough dollars."
Market participants were increasingly cautious about possible market intervention by Japanese authorities to fight the currency's rapid rise, which hurts Japanese exporters by eating into profits made overseas when the profits are repatriated.
Japan's top government spokesman said on Thursday excessive currency moves are undesirable as they would hurt the stability of Japan's economy and financial markets.
But few expect immediate action by Japanese authorities as the yen is still far away from this year's peak against the dollar, traders said.
In January, the dollar fell to near 87 yen, its weakest since July 1995, as a massive unwinding of risky yen carry trades occurred at the height of the global financial crisis.
Analysts said intervention by Japanese authorities is unlikely to happen at the moment as Tokyo's Nikkei stock average is still well above its a 26-year closing low hit just above the 7,000 level in March.
"If the stronger yen pushed down the Nikkei remarkably then they would become worried about the yen's move especially if the Nikkei falls to the recent lows," said Masafumi Yamamoto, head of FX strategy Japan at Royal Bank of Scotland. "But it's not the time yet."
The Nikkei closed down 1.4 percent at 9,291.06.
Investor fears about China's demand for Australian resources cast a shadow over the Australian dollar after a report said a Chinese customer had cancelled a shipment of Australian coal while it was at sea.
The Australian dollar eased 0.2 percent to $0.7785, with a subdued reaction to Thursday's data showing the Australian labour market was not weakening at a faster pace.. It fell more than 1 percent against the dollar on Wednesday and 3.5 percent against the yen.
Sterling rose 0.2 percent to $1.6090, staying above a one-month trough of $1.5983 hit the previous day when it fell 0.5 percent, according to Reuters data.
The Bank of England is widely expected to leave interest rates unchanged at the current 0.5 percent level as it concludes its two-day policy meeting later in the day. (Editing by Joseph Radford)