June 25 Tuesday 10:45 GMT
* Dollar index retreats from near three-week highs
* Fed officials play down fears of imminent stimulus withdrawal
* U.S. data in focus later in the session
By Anooja Debnath
LONDON, June 25 (Reuters) - The yen rose against the dollar on Tuesday as investors opted for the Japanese currency's relative safety on concerns about a scaling back of U.S. stimulus and a credit crunch in China.
The dollar, which rallied after Federal Reserve Chairman Ben Bernanke said last week that the central bank could trim its bond-buying programme later this year, also slipped after top Fed officials downplayed fears of an imminent end to stimulus.
The dollar was down 0.3 percent at 97.40 yen, off Monday's two-week high of 98.72 yen. A reported options expiry at 97.50 yen was seen keeping the pair pinned to that level.
Aganst a basket of currencies, the dollar was down 0.1 percent on the day at 82.357, retreating from a near three-week peak of 82.841 on Monday.
The yen, which tends to benefit in times of market turmoil, rose as Asian shares were dragged lower by Chinese stocks which slumped to their lowest since early 2009, on rising concerns about a potential money market squeeze.
In an attempt to calm nerves, China's central bank said it would guide markets to reasonable rates.
"It is the broader liquidity story which is having an impact on asset markets and leading to some equity market volatility... this is filtering into FX," said Ian Stannard, head of European FX strategy at Morgan Stanley.
"But overall the dollar trend will remain very much in place... the dollar will not only be supported by the Fed tapering debate but if we see equity markets supported by Fed reassurance, that will be dollar-positive."
A fall in benchmark U.S. Treasury yield from a nearly two-year high touched in the previous session, also curbed the dollar's ascent.
The dollar and U.S. yields came off their peaks late on Monday, after Minneapolis Fed President Narayana Kocherlakota and Dallas Fed head Richard Fisher both reassured investors who feared the impact of the Fed tapering its monthly $85 billion bond-buying programme.
But some market participants believe that since Fed officials' comments did not contradict anything Bernanke said, the central bank's overall intentions and the dollar's uptrend are clear.
"No matter how much they talk now, unless they come out and say they're not going to do any tapering, it's pretty much on the way, with the dollar bid," said Bart Wakabayashi, head of forex at State Street Global Markets in Tokyo.
The euro was flat at $1.3121, away from a low of $1.3058 on Monday, its weakest level since June 5.
Investors will focus on U.S. data later on Tuesday in light of the Fed's message that its outlook for stimulus will be tied to how the economy fares in coming months. Durable goods, consumer confidence and housing data are all due later in the day.
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