February 7, 2018 / 7:09 AM / 10 months ago

FOREX-Dollar slips vs yen as recovery in stocks lose steam

* Dollar/yen dips, Nikkei rallies early but hands back most gains

* Dollar index inches higher

* Fall in U.S. stock futures points to lower open on Wall Street (Updates throughout)

By Shinichi Saoshiro

TOKYO, Feb 7 (Reuters) - The dollar slipped against the yen on Wednesday, handing back earlier gains, as the recovery in share markets lost steam and dampened investor risk appetite.

The greenback was 0.4 percent lower at 109.155.

The currency reached a high of 109.720 yen earlier in the day as regional equities such as Japan's Nikkei soared, taking their cue from a late rebound on Wall Street.

But the dollar drifted lower as the Nikkei, which rose as much as 3.4 percent, gave back most of its gains on anxiety over more weakness in U.S. share markets. U.S. stock futures fell during Asian trade, stoking such fears.

The focus remains on U.S. stocks, which were the source of the latest turbulence in global markets and currencies.

The recent surge in long-term U.S. bond yields to four-year highs had helped trigger the slide in the equity market, and while yields have pulled back from those peaks, they still remain elevated.

"The 10-year Treasury yield has nudged back ahead of today's auction. Depending on how the auction goes, U.S. equities could face renewed pressure," said Makoto Noji, senior strategist at SMBC Nikko Securities.

"Global stocks are expected to remain on a nervous footing going forward," Noji said.

Following soft demand for a $26 billion three-year sale on Tuesday, the U.S. Treasury will auction $24 billion of 10-year government bonds later on Wednesday.

The greenback performed slightly better against currencies as investors have sought shelter in the greenback amid the recent rout in global equities, which was triggered by a massive decline in Wall Street shares.

The dollar index against a basket of six major currencies was a shade lower at 89.530, after reaching a two-week peak of 90.034 overnight.

The euro edged up 0.1 percent to $1.2391 after slipping to a two-week low of $1.2314 the previous day.

Wall Street shares bounced about 2 percent on Tuesday after suffering the biggest one-day sell-off in more than six years. S&P mini futures, however, were down 1 percent and pointed to a lower open for U.S. shares later in the day.

The Australian dollar, which tends to suffer during risk aversion, was 0.5 percent lower at $0.7868.

The pound was flat at $1.3951 after touching a low of $1.3838 overnight, its weakest since Jan. 19.

The Swiss franc, a perceived safe haven along with the yen, was 0.1 percent higher at 0.9348 franc per dollar after losing 0.45 percent overnight. (Editing by Sam Holmes and Jacqueline Wong)

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