FOREX-Dollar edges up but China concerns check sentiment


* Yen remains not far from two-week high against dollar

* Preliminary survey awaited for clues on Chinesemanufacturing

By Lisa Twaronite

TOKYO, Oct 24 (Reuters) - The dollar edged up against majorcounterparts in early Asian trade on Thursday, but was hemmed inrecent ranges as investors remained cautious about liquidityconditions in China.

Chinese short-term money-market rates rose sharply tothree-month highs on Wednesday after the People's Bank of Chinafailed to inject cash for a second day and regulators expressedconcern about loose liquidity and hinted they are consideringtaking measures to address inflation risks.

"Tighter liquidity at a time when the world is watching thepace of Chinese growth carefully has weighed heavily on Asianstocks, risk appetite and high beta currencies," Kathy Lien,managing director at BK Asset Management, said in a note toclients.

Investors will be watching a preliminary survey on Chinesemanufacturing activity data due at 0145 GMT for the latest gaugeon the strength of that country's economy.

The dollar edged up against the yen to buy 97.42 yen,but remained not far from a two-week low of 97.13 touched in theprevious session.

The dollar was steady at 0.8922 Swiss francs, afterdropping to 0.8908 on Wednesday, its lowest level since November2011.

The dollar index, which tracks the greenback against abasket of six major rivals, was treading water from late U.S.levels at 79.282, with this year's low in sight at 78.918set in early February.

The euro was nearly unchanged at $1.3777, withconcerns about Europe's financial sector seen holding back thecommon currency. On Wednesday the euro rose to as high as$1.3794, its highest since mid-November 2011.

The European Central Bank said on Wednesday it would putmajor euro zone banks through rigorous tests next year to buildconfidence in the sector.

But some analysts say that if the review reveals largeproblems, it could have the opposite of its intended effect.Euro zone bank shares fell after the ECB announcement.

The Australian dollar was slightly higher at $0.9630, but still well below its 4-1/2 month high of $0.9758hit on Wednesday after a higher-than-expected domestic inflationreading reduced the chances of further interest rate cuts fromAustralia's central bank.

The dollar remains pressured by expectations that the U.S.Federal Reserve will delay tapering its stimulus until nextyear, after weak U.S. jobs data last week suggested the recoveryis not yet on firm footing.

U.S. Treasury yields fell to their lowest levels in threemonths on Wednesday, as investors increased their bets that theFed will maintain its asset purchases for a longer period.

Investors await U.S. data later in the session on weeklyjobless claims, the trade balance and the latest reading on newhome sales.

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