SINGAPORE, July 7 (MNI) - The U.S. dollar continued to hold a mixed bias through the Asian afternoon Wednesday as risk appetite was eroded by falls in major regional stock markets and disappointing U.S. data overnight higher. The region's main stock market bourses continued to trade lower in the afternoon with Japan's Nikkei 225 index ending the day down 0.63% at 9,279.65 although the Shanghai Composite Index had edged up 0.07% at 2,411.76 ahead of the close. Dealers said a disappointing reading of the U.S. ISM non-manufacturing index also led to selling pressure on the U.S. currency. The ISM's composite index of non-manufacturing activity fell to 53.8 in June from an unrevised 55.4 in May, compared with consensus expectations of 55.0. Risk aversion was the main trading theme through a subdued Asian session, putting yen crosses under some selling pressure while higher risk currencies like the Australian dollar also retreated. "The major theme for these next few weeks would be the weakness in U.S. data and the double-dip scenario, and in particular to what extent the Fed is likely to keep key interest rates ultra-low," said analysts at United Overseas Bank. "This may have a short to medium term impact on the level of US bond yields and making U.S. dollar less attractive against high yielding currencies tied to global risk appetite." Dollar-yen was trading near its session lows at Y87.48 in the afternoon while euro-yen was also at the low end of its intraday range so far, at Y110.20. Dollar-yen made a marginal high of Y87.68 early in Asia but was pinned back by corporate offers, mostly exporters, selling from Y87.90 to Y88.00. Dollar-yen then sank to a Y87.37 low in the early afternoon when the initial support at Y87.40 gave way. "Yen may also be receiving support, not only from falling U.S. yields, but also from MOF data that show that China has increased its investment in JGBs this year," commented RBS strategist Greg Gibbs. "The amounts are not huge, but it does highlight that in the search for diversity, Japan's low yields are no longer such an obvious impediment compared to the rest of the G4." Euro-dollar was at $1.2598 since around midday here, after covering a $1.2596 to $1.2634 range earlier in the morning. Dealers said last night's short-covering market action had generally faded today, and the pair held a heavy tone particularly from the late morning here, amid rumored selling by a U.S. bank, which eventually sent it to a $1.2586 low. "While some are talking about returning to $1.3000 in euro-dollar, this would require not only paring back of short euro positions, but also turning increasingly long euros," commented Bank of New York Mellon in a daily note. "That is an area few are willing to risk with the European sovereign debt crisis entering the turbulent summer doldrums." Ahead, there are few major data release due in coming sessions to move markets until the U.S. second quarter earnings season begins next Monday with Alcoa earnings. The European Central Bank and the Bank of England hold policy meetings this Thursday, though both are expected to keep interest rates unchanged. Their accompanying statements will be closely scrutinized for insight into future monetary policy, traders said.

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