* Dollar sags vs yen after stops triggered below 97.50 yen
* Sterling awaits BoE's forward guidance
* Fed tapering talk gains momentum, dollar to rise
By Anooja Debnath
LONDON, Aug 7 (Reuters) - The dollar fell to a one and a half month low against the yen on Wednesday on expectations Japanese investors would convert their overseas earnings back into yen before a major local holiday.
The U.S. currency was generally was firmer against most other major currencies after dovish Federal Reserve policymaker Charles Evans said the central bank will probably scale back bond buying later this year.
Sterling fell before the release of the quarterly inflation report where Bank of England Governor Mark Carney is expected to offer forward guidance on how long policy will stay easy. It was down 0.3 percent at $1.5306.
The yen, which is sought after as a safe-haven currency, also made broad-based gains against major currencies as global stock markets were in the red.
The U.S. currency came under pressure as a break of 97.50 yen sparked stop-loss dollar selling, which pushed it to a low of 96.76 yen on trading platform EBS, its lowest level since late June. It was last down 0.8 percent at 96.92 yen.
The euro was also down 1 percent at 128.61 yen.
Businesses in Japan shut down for a couple of weeks around mid-August for the Obon holidays and markets participants expect yen demand from Japanese investors to rise ahead of big capital inflows from interest payments on the country's large U.S. Treasury holdings.
"There are some expectations that investors will redeem, repatriate or convert earnings, whether they be dividends or coupons back into yen before the Obon holidays," said Neil Jones, head of hedge fund FX sales at Mizuho Corporate Bank.
"It is the fear of the flow rather than the actual flow that is causing yen strength. What it is doing is that it is causing investors around the world to cut long dollar/yen positions."
Jones also pointed to a fall in the Australian dollar and sterling against the yen supporting the Japanese currency.
The dollar index was 0.1 percent higher at 81.697.
Charts: WorldWideMarkets Flash Trader