By Hideyuki Sano
TOKYO (Reuters) - Major currencies were on hold on Tuesday as investors readied for key Chinese economic data due in a few hours as worries about the global economic outlook deepen and oil prices show scant signs of life.
The dollar stood at 117.38 yen, having recovered from a five-month low of 116.51 set on Friday for now but market players say the yen is likely to be underpinned by weak confidence in global economic prospects.
The yen was the best performer so far this year among major currencies with gain of about 2.5 percent. Falls in the Chinese yuan earlier this year sparked fears over the Chinese economy, prompting investors to buy back safe-haven assets including the yen.
"At the heart of the yen's strength are falls in the yuan, which were perceived to be negative on the global economy," said Shunsuke Yamada, chief Japan currency strategist at Bank of America Merrill Lynch.
"The yuan's fall also makes it less likely for the Fed to raise rates and nullify the existing reasons to bet against the yen," he said.
Indeed, currency speculators in Chicago currency futures became net yen buyers last week for the first time since Prime Minister Shinzo Abe took office in late 2012.
Although Beijing has managed to stabilise the yuan through massive intervention, signs of massive capital outflow from China highlighted worries over China's economy.
Against this backdrop, the Chinese economic data due later in the day is a major market focus for the day.
Economists expect China's GDP growth to have slowed 6.8 percent from a year earlier in the three months to December, from 6.9 percent in the preceding quarter.
The Australian dollar, seen as a proxy for China trades, changed hands at $0.6872, not far from a seven-year low of $0.6827 touched on Friday.
Pressures on commodity-linked currencies such as the Aussie remain strong, with oil prices hitting a new 12-year low on Monday and many other commodities also flirting with multi-year lows.
Concerns are also growing that the U.S. economy, which had been considered as one of the brightest spots in the world, may not escape the headwind, following surprisingly weak U.S. retail sales data published on Friday.
"One major support for risk assets has been that the U.S. economic seems robust. If the U.S. economy is losing steam, that would be really bad for global investor sentiment," said Shinichiro Kadota, chief Japan currency strategist at Barclays.
Rising caution on the U.S. economy helped to curb the U.S. dollar. The dollar index kept some distance from this year's high of 99.634 touched on Jan, 5 and last stood at 99.126.
The euro has been range-bound at $1.07-$1.10 so far this year and last stood at $1.0890.
Sterling, a big loser since the start of December on softening economic outlook and worries over a UK referendum on its membership of the European Union, continued its downward spiral to edge near its 2010 trough.
The pound stood at $1.4250, just above $1.4228 hit in May 2010.
UK inflation data due at 0930 GMT is a key focus with a weak reading having the potential to push back expectations of a rate hike by the Bank of England even further, hurting the pound.
The Canadian dollar also hit a 13-year low of C$1.4650 on Monday as Brent crude futures fell below $29 per barrel. It last changed hands at C$1.4545.
(Reporting by Hideyuki Sano; Editing by Eric Meijer)
