* Dollar/yen steady above previous day's 2-week low
* Aussie dollar bolstered by rise in China HSBC flash PMI
* Focus on Chinese money market rates
By Masayuki Kitano and Lisa Twaronite
SINGAPORE/TOKYO, Oct 24 (Reuters) - The dollar held above atwo-week low versus the yen on Thursday while the Australiandollar rose as an upbeat reading on China's factory sector easedworries about the outlook for the Chinese economy.
However, market players were keeping an eye on a furtherjump in China's money market rates.
A spike in Chinese money market rates on Wednesday haddented Chinese equities and knocked risk-sensitive currenciessuch as the Australian dollar lower, triggering a broad rise inthe yen.
On Thursday, China's benchmark seven-day repo rate opened upnearly a full percentage point at 5 percent after China'scentral bank let cash flow out of the money market for thesecond straight week.
Still, the latest rise in Chinese money market rates hasbeen relatively tame compared to the sharp rises seen back inJune, when China's central bank engineered a credit crunch inthe interbank market to warn banks about risky lending policies.
Concerns about the money market moves were also tempered bya preliminary survey which showed China's manufacturing sectorexpanded at its fastest clip in seven months in October.
"The Chinese numbers this morning have helped turn sentimentaround slightly but there are still concerns about money marketconditions," said Mitul Kotecha, head of global foreign exchangestrategy for Credit Agricole in Hong Kong.
However, Kotecha said the focus on China's money marketcould prove temporary.
He added that the dollar was unlikely to fall too muchagainst the yen unless U.S. Treasury yields see another pushlower.
The dollar held steady at 97.35 yen, clinging above atwo-week low of 97.15 yen set on Wednesday. The dollar istesting support at its 200-day moving average, now at about97.31 yen.
"A drop below there could open the way for a downsideattempt on the back of technical factors," said a trader for aEuropean bank in Tokyo, adding that such a breach could open theway for a test of levels around 96.50 yen and possibly lower.
The Australian dollar rose 0.4 percent to $0.9652,regaining some ground in the wake of its 0.9 percent drop onWednesday.
The U.S. dollar remains pressured by expectations that theU.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.
The U.S. 10-year Treasury yield fell to itslowest levels in three months on Wednesday, as investorsincreased their bets that the Fed will maintain its assetpurchases for a longer period.
The dollar index, which tracks the greenback against abasket of currencies, slipped 0.1 percent to 79.204. Ithad hit an 8-month low of 79.137 on Wednesday.
The euro edged up 0.1 percent to $1.3790, holdingright near Wednesday's high of $1.3794, the euro's highest levelsince November 2011 on trading platform EBS.