* Dollar/yen touches 2-week low, Aussie also sags * Dollar cautious after choppy session on Friday (Updates prices, adds comments) By Anirban Nag LONDON, May 5 (Reuters) - The yen rose to a two-week high against the dollar on Monday after a survey showing China's manufacturing activity contracted for a fourth straight month bolstered the safe-haven Japanese currency.
Strong headline U.S. payrolls numbers on Friday initially boosted the dollar against the yen, but it then erased those gains as investors focussed on less promising labour force and wages data as well as the crisis in Ukraine.
The dollar lost further ground after a private survey showed China's manufacturing activity remained weak in April, adding to signs that the world's second-largest economy is losing momentum.
The data also dragged the growth-linked Australian dollar down against the yen. China is Australia's biggest export market.
The greenback fell as low as 101.86 yen, its weakest level since April 17 and down more than 1 yen from Friday's near one-month high of 103.025 yen on trading platform EBS. It was last trading at 102, still down on the day, with volumes very low on the Reuters Matching system.
Volumes are likely to be thin this week, with Japanese markets closed on Monday and Tuesday for public holidays. Banks in London, the biggest market, were also shut on Monday.
RISK AVERSION "There is risk aversion that is keeping the yen supported," said Niels Christensen, FX strategist at Nordea, Copenhagen.
"Also, the dollar has been weighed down by the U.S. data which shows wages are not growing fast enough to trigger worries about inflation. As a result, tightening by the Fed is some way off, and that is not helping U.S. yields." Even though U.S. employers hired workers at the fastest rate in more than two years in April, there was a large increase in the number of people dropping out of the labour force, and weak wage growth.
Further undermining the dollar was a drop in U.S. Treasury yields, particularly at the long end. The benchmark ten-year yield plumbed a three-month low of 2.57 percent and was last at 2.59 percent.
The dollar will probably stay on the defensive against the yen in the near term, especially since market positioning is still probably tilted toward favourable dollar bets, 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.
The yen rose broadly, with the euro shedding 0.2 percent to 141.55 yen, and the Australian dollar 0.2 percent to 94.64 yen.
The euro was steady at $1.38715, holding above Friday's intraday low of $1.3812.
It rose to 9.0572 crowns after data showed Swedish industrial production fell 3.8 percent in March, adding to fears about a sharp slowdown and possible deflation.
(Additional reporting by Masayuki Kitano in SINGAPORE; Editing by John Stonestreet)