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FOREX-Yen hits 2-week high vs dollar on soft China PMI, Aussie sags

* Private survey shows China manufacturing activity shrinks for 4th straight month in April

* HSBC/Markit's final China manufacturing PMI for April at 48.1

* Aussie sags, dollar/yen touches 2-week low

* Dollar cautious after choppy session on Friday (Updates levels, adds comments)

By Masayuki Kitano

SINGAPORE, May 5 (Reuters) - The yen hit a two-week high against the dollar on Monday as risk appetite was depressed by a survey showing China's manufacturing activity contracted for a fourth straight month, putting the Australian dollar on the skids.

The U.S. dollar had already been falling against the yen, after staging a reversal late last week that saw the greenback erase all of its gains sparked by a strong U.S. payrolls report.

The dollar lost further ground against the Japanese currency after a private survey showed China's manufacturing activity remained weak in April, adding to questions over whether the world's second-largest economy is still losing momentum.

That dragged the Australian dollar lower versus the yen. The Aussie is sensitive to economic news out of China, Australia's biggest export market.

The greenback fell to as low as 101.86 yen, its weakest level since April 17 and down more than a full yen from Friday's near one-month high of 103.025 yen on trading platform EBS.

The dollar last fetched about 101.90 yen, down 0.3 percent in holiday-thinned trade, with Japanese markets closed on Monday and Tuesday for public holidays.

The greenback will probably stay on the defensive against the yen in the near term, especially since market positioning is still probably tilted toward being long the dollar, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

"In the short term, it (the dollar) will probably stay heavy," Okagawa said.

"There are probably some sporadic stops as well as bids (for the dollar)," Okagawa he said, adding that the likely mixture of stop-loss dollar offers along with dollar bids suggests that any drop in the dollar against the yen may occur only gradually.

The yen rose broadly, with the euro shedding 0.3 percent to 141.36 yen, while the Australian dollar fell 0.4 percent to 94.36 yen.

The Aussie dollar also eased 0.2 percent against the U.S. dollar to $0.9262, but remained above Friday's one-month low of $0.9203.

The greenback struggled to gain traction after failing on Friday to sustain its post-jobs data gains.

The euro was steady at $1.3876, holding above Friday's intraday low of $1.3812.

Data on Friday showed U.S. employers hired workers at the fastest clip in more than two years in April, pointing to a rebound in economic growth after a severe winter.

Traders said a combination of factors took the wind out of the dollar, including a worryingly-large increase in the number of people dropping out of the labour force, weak wage growth and escalating violence in Ukraine.

Further undermining the dollar was a drop in U.S. Treasury yields particularly at the long-end, resulting in a marked flattening of the curve. The benchmark yield plumbed a three-month low of 2.57 percent and was last at 2.59 percent.

"Market reaction to the report suggested cautiousness in overrating the payrolls gain," analysts at Barclays Capital wrote in a note to clients.

The concerns about Ukraine and heightened geopolitical risks have occasionally given a boost to safe assets and currencies in recent weeks.

(Additional reporting by Ian Chua in Sydney; Editing by Shri Navaratnam)