FOREX-Yen nurses losses as stocks rally cheers mood, dollar eyes data

* Stocks rise after Wall Street rally

* Fading risk of September Fed hike supports risk sentiment

* Any revision to Q2 US growth to boost dollar (Updates, adds comments)

By Anirban Nag

LONDON, Aug 27 (Reuters) - The yen nursed losses against the dollar on Thursday as calm returned to currency markets with gains in global equities, including a 5 percent jump in Shanghai, underpinning risk sentiment and sapping demand for safe haven currencies.

Comments from an influential Federal Reserve official on Wednesday downplaying prospects of a September interest rate hike helped improve sentiment. In the currency market, investors reacted by unwinding recent moves that had lifted both the yen and the euro.

A recent spike in risk aversion had triggered short-covering in the yen and the euro, which are popular funding currencies for carry trades. Such trades involve selling low-yielding currencies to buy higher-yielding currencies and assets.

Demand for the yen and the euro showed signs of ebbing, however, with the dollar rising along with stock markets. Traders said any upward revision to second-quarter growth data out of the United States later in the day, could bolster the greenback.

The dollar was up 0.3 percent against the yen at 120.24 yen , and well above a seven-month low of 116.15 yen struck earlier this week. The euro was lower against the dollar at $1.1285, well below this week's seven-month high of $1.1715.

The dollar index rose 0.3 percent to 95.401.

"The focus is shifting back to U.S (Other OTC: UBGXF - news) . data and central banks. The market is looking for more dovish comments from central banks to counterbalance the tensions stemming from China," said Manuel Oliveri, currency strategist at Credit Agricole (Swiss: ACA.SW - news) .

"Incoming U.S. data, if it surprises on the upside will give a boost to the dollar."

New York Fed President William Dudley said on Wednesday an interest rate hike next month seemed less appropriate given the threat posed to the U.S. economy by recent market turmoil.

Traders said Dudley's relatively dovish tones, combined with upbeat data showing a big increase in U.S. business investment plans have helped soothe market nerves.

A focal point for investors is an annual conference in Jackson Hole, Wyoming, attended by many of the world's top central bankers. On Saturday, Fed Vice Chair Stanley Fischer will take part in a panel discussion on "U.S. Inflation Developments".

The market will be watching to see if central bankers issue more assurances about keeping monetary policy accommodative especially since recent market volatility drove many investors to liquidate their portfolios and raised concerns about the global investment climate.

With investors pushing back chances of a Fed hike this year, analysts said markets should also be prepared for the European Central Bank to respond by increasing its asset purchase programme, a factor that should weigh on the euro.

"We are opening an opportunistic trade recommendation to be long dollar versus the euro. This trade has the same target as our three-month forecast of euro/dollar at $1.05," said Thomas Flury, strategist at UBS (NYSEArca: FBGX - news) 's chief investment office. (Editing by Toby Chopra)