FOREX-Aussie, euro pare losses after China data

* Aussie, euro pare losses after China data

* China slowdown in line with market expectations

* Growth worries keep dollar index near two-month lows

* Focus moving back to U.S. data, earnings

By Hideyuki Sano

TOKYO, July 15 (Reuters) - The Australian dollar and the euro pared their hefty losses on Thursday after Chinese economic data pointed to a mild slowdown, rather than a deeper and more uncontrolled one as some investors had feared.

The Aussie dollar erased the half percentage point loss against the dollar it had made after an official Chinese paper reported the economy may slow more sharply than expected in the second half of this year.

"The data has attracted much attention but at the end of the day, they were not far from market expectations. They showed the Chinese economy is slowing down but that's what markets have been looking for," said Hideaki Inoue, manager of foreign exchange at Mitsubishi Trust and Banking Corp.

The Australian dollar stood at $0.8821 , down 0.1 percent on the day but far above the day's low of $0.8780 hit after China Securities Journal reported the economy may lose momentum more than expected later this year. [ID:nTOE66E019]

It hit a two-month high of $0.8871 hit on Wednesday.

The euro erased its losses to change hands at $1.2746 , not far from its two-month high of $1.2778 hit on Wednesday as traders bought back the currency, which -- long dogged by worries over euro zone's debt problem -- tends to benefit from rising risk appetite.

China's economic growth slowed to 10.3 percent in the second quarter from 11.9 percent in the first quarter in response to the fading of government fiscal and monetary stimulus as well as a high base of comparison a year earlier. [ID:nTOE66D060]

With Chinese data out of the way, the market's focus is likely to shift back to the strength of U.S. economy, traders said.

The U.S. Commerce Department reported on Wednesday that U.S. retailers' June sales declined 0.5 percent -- more than twice the 0.2 percent drop forecast by economists polled by Reuters.

That has sapped some of the optimism triggered by strong U.S. corporate earnings being released this week, leaving the U.S. dollar near its two-month low on a basket of currencies.

The dollar index <.DXY> stood at 83.328, down 0.1 percent on the day and not far from a two-month low of 83.205 hit on Wednesday following weak U.S. retail sales numbers for June and dovish Federal Reserve minutes from its last meeting. [ID:nWALEIE6D2]

The index is holding just above support at around 83.15, the 38.2 percent retracement of the its rise from a low of 74.17 in November 2009 to a high of 88.59 on June 8.

The Japanese yen maintained small gains, though its gains were pared after the release of Chinese data.

The Japanese yen rose 0.2 percent to 88.24 yen per dollar and gained 0.40 percent against the Aussie dollar to 77.85 yen (Additional reporting by Anirban Nag and FX analyst Krishna Kumar in Sydney; Editing by Joseph Radford & Jan Dahinten)