* Disappointing data weighs on risk appetite
* Markets now eyeing China PMI
* Aussie braced for 25 bps RBA rate cut, 50 bps a danger
* Many Asian centers shut for holiday
By Ian Chua
SYDNEY, May 1 (Reuters) - The yen held at two-month highs against the dollar on Tuesday, having rallied across the board overnight as investors snapped up the safe-haven currency after disappointing economic news from Canada to Spain tempered risk sentiment.
Data showing Spain slipping into recession, Canada's economy unexpectedly shrinking in February and business activity in the U.S. Midwest falling sharply gave markets the green light to cash in on recent gains in risk assets.
The dollar fell as deep as 79.73 yen, bringing the 100-day moving average at 79.58 in focus. It last stood at 79.85. The euro skidded to a two-week low at 105.47 yen , before steadying at 105.74.
Traders said final month-end positioning on Monday also contributed to the choppy price action.
The market is now bracing for the official reading of China's manufacturing activity due at 0100 GMT. Forecasts is for the PMI to come in at 53.6, versus 53.1 in March, so a weaker reading could spark further risk aversion.
Still, trading is likely to be subdued with much of Asia and Europe shut on Tuesday for the May Day holiday.
The Canadian dollar was among the biggest losers after the economy shrank by 0.2 percent in February, cooling talk that the Bank of Canada could start raising interest rates in the near future.
It slid below 81.00 yen for the first time since April 17, while the greenback rose to C$0.9874, pulling up from a 7-1/2 month low around C$0.9800 plumbed Friday.
"We buy CAD/JPY at the 80 handle or possibly a bit below, given likely heavy stop losses/take profits around that area," said Sebastien Galy, strategist at Societe Generale.
Also losing a bit of ground, the Australian dollar slipped to $1.0420, from a one-month peak of $1.0475 set on Friday.
The Aussie's immediate fortunes depend on what action the Reserve Bank of Australia (RBA) takes at the end of its policy meeting at 0430 GMT. An easing is considered a done deal with only the size in doubt.
Markets are giving a one-in-four chance of a deep 50 basis point cut to the 4.25 percent cash rate. This means anything less than that could see the Aussie stage a bit of a bounce.
"If only 25bp is delivered, it will be up to the tone of the accompanying RBA statement to prevent the AUD from rallying on the decision," analysts at BNP Paribas wrote in a client note.
Indeed, any hint of a follow-up cut in June should limit a strong positive response in the currency.
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