Yen back in favour as China concerns hit risk appetite

By Ian Chua

SYDNEY (Reuters) - The yen was broadly firmer early on Wednesday as demand for the safe-haven currency picked up after disappointing Chinese trade data took the wind out of a global risk rally.

The dollar last stood at 112.67 yen , having slid 0.7 percent, while the euro flirted with 124.00 yen , well off Friday's high of 125.585.

The Australian dollar dipped under 84.00 yen , pulling further from a one-month high of 85.00 set on Monday.

European and U.S. stocks fell overnight while many commodities came under pressure after China's exports tumbled by the most in over six years last month.

The data highlighted risks facing the global economy, bolstering expectations for dovish outcomes at central bank policy reviews in Europe and New Zealand on Thursday.

The European Central Bank is considered almost certain to ease, but no one quite dares to position for bold action given the ECB has disappointed before.

Still, the euro has struggled to perform with the threat of ECB policy action looming. The common currency last stood at $1.1010 , having briefly dipped below $1.1000 overnight.

Also on the defensive, the New Zealand dollar traded at $0.6737 , retreating further from Friday's peak of $0.6820.

While markets only imply a small chance of a rate cut by the Reserve Bank of New Zealand, investors suspect it is only time before the central bank delivers another cut to the 2.5 percent cash rate.

"The RBNZ did signal a bias to ease in January and the risk is that it decides to move earlier to prevent further strengthening in the exchange rate," analysts at BNP Paribas wrote in a note to clients.

In contrast, the Bank of Canada is expected to keep rates on hold as it waits to gauge what impact the government's expected spending measures might have on the economy.

But a retreat in oil prices took a toll on the Canadian dollar, which slid to C$1.3424 per USD , from a 3-1/2 month peak of C$1.3262 set on Monday.

The Australian dollar fared better among its commodity peers thanks to further gains in iron ore, Australia's single biggest export earner. It stood at $0.7428 , still within reach of an eight-month high of $0.7486.

(Editing by Richard Pullin)