Yen holds gains after Chinese move, eyes on stocks

TOKYO, May 30 (Reuters) The yen held its gains on Wednesday after rebounding from a record low against the euro as investors cut back risky positions in carry trades on China's announcement of a rise in stamp duty on stocks.

Investors were watching for a reaction in regional stock markets after U.S. stocks trimmed gains in the previous session on expectations that China's move could prompt further losses in global equity markets and heighten risk aversion.

Tokyo's Nikkei share average was up 0.2 percent in early trade.

Carry trades, in which investors borrow low-yielding currencies such as the Japanese yen to fund purchases of assets offering higher returns, are vulnerable to reduced risk appetite, often prompting a sharp appreciation of the yen when investors reverse such positions.

Analysts say, however, that the impact on global equity markets may be short-lived, as it was last week after remarks by former Federal Reserve Chairman Alan Greenspan that he feared a dramatic contraction in Chinese stocks.

''While we believe that the announcement may cause a wobble in risk appetite, it is unlikely to significantly derail market trends,'' currency analysts at Morgan Stanley said in a note to clients.

China authorities are raising the stamp duty on share trades to 0.3 percent from 0.1 percent from Wednesday.

The euro edged down against the yen to 163.50 yen after reaching a fresh record high of 164.29 yen in the previous session as comments by European Central Bank officials suggesting more euro-zone rate increases prompted investors to buy the single European currency.

The dollar ticked up against the yen just after Japanese industrial production figures came below expectations but quickly fell back to 121.50 yen down 0.1 percent from late U.S. trading.

The dollar remains in sight of a three-month high of 121.89 yen hit last Friday.

Japan's industrial production fell 0.1 percent in April from a month earlier, against a consensus market forecast for a 0.5 percent rise.

For Wednesday, investors may also focus on minutes of the Fed's last rate-setting meeting for clues on the future path of monetary policy, and the ADP employment report for May to get a peek into the monthly U.S. payrolls figure due on Friday.

The euro was trading flat at $1.3452 after rising to one-week highs around $1.3520 on Tuesday.

The dollar got some support in the previous session after a U.S. consumer confidence report for May showed a higher inflation outlook for the next 12 months, diminishing expectations for interest rate cuts by the Federal Reserve.

The Canadian dollar rose to a fresh 30-year high against the greenback on Tuesday after the Bank of Canada held its key overnight interest rate unchanged at 4.25 percent, as expected, but said a near-term rate hike may be needed to tame inflation.

The dollar was flat against the Canadian dollar at C$1.0735 in early Asian trade, staying near a 30-year low of C$1.0710 REUTERS CS SBA BST0621