* Traders cite report on China's bank capital rules
* Dollar pressured by Japan exporters and hedge fund selling
* Yen surges broadly, Aussie/yen falls
By Masayuki Kitano
TOKYO, Aug 21 (Reuters) - The yen surged to a one-month high against the dollar on Friday, as traders remained worried about the potential for further weakness in Chinese shares and shied away from risky investments.
The dollar fell to as low as 93.47 yen on trading platform EBS and the Australian dollar fell more than 1.5 percent at one point.
The yen surged amid renewed attention to China's bank capital rules.
Sources said earlier this month that China's banking regulator, concerned record lending could lead to a spike in bad loans, may tighten banks' capital rules by excluding subordinated bonds they sell to other banks from their capital base.
Some financial regulators estimate that as much as one-fifth of banks' new loans have flowed to China's surging stock and property markets this year, creating asset-price bubbles.
A similar report on Friday re-focused attention on this issue amid worries about the outlook for Chinese shares, which have slid more than 15 percent from a peak hit earlier this month and seen some volatile swings this week.
But Shanghai shares, which have been a key driver of currency moves, were up 0.7 percent after turning negative earlier.
"If there is now a sense that the authorities are tightening regulations, it sends a negative message for the stock market but also it could restrain the economy," said Mitul Kotecha, global head of FX strategy at Calyon in Hong Kong. "The reason it has a big impact on the rest of the world is that so many investors are looking at China to help drag the world economy out of recession," Kotecha said.
After trimming some losses, the dollar was down 0.5 percent against the yen at 93.74 yen.
The dollar was dragged lower against the yen, partly due to selling by Japanese exporters and hedge funds, said a trader for a Japanese brokerage house.
The fact that dollar/yen has recently fallen to below the bottom of the cloud on daily Ichimoku charts, bodes ill for the dollar, traders said.
The euro fell 0.6 percent against the yen to 133.40 yen. Against the dollar, the single European currency dipped 0.2 percent to $1.4232. Global stock markets have rallied since early March, amid a broad rise in risk assets, but there have been concerns that such gains in equities may have run ahead of economic fundamentals.
Market players said it was too early to draw too many conclusions from the falls in Chinese shares over the past few weeks, saying they were due for a pull-back given their sharp rally this year.
"I think views among market players are mixed. Some probably want to buy risk assets on dips, regardless of how Shanghai shares do, thinking that the economy is basically headed toward recovery," said a trader for a major Japanese trading house.
But other investors may be finding it hard to be very bullish toward risk assets, partly because of the recent falls in Shanghai shares, the trader said. (Additional reporting by Charlotte Cooper and Kaori Kaneko; Editing by Joseph Radford)