TOKYO, JAPAN - The dollar declined against the yen in Asia Thursday as traders remained cautious about the health of the US economy, despite a strong rally in stocks on Wall Street.

Worries over China's slowest economic growth in at least a decade underpinned demand for currencies seen as a low-risk investment, such as the yen.

The dollar fell to 98.96 yen in Tokyo afternoon trade from 99.37 in New York late Wednesday. The euro dipped to 1.3203 dollars from 1.3226 and to 130.66 yen from 131.43.

Market players were cautious in their assessment of the US economy after recent gloomy data, said Mitsubishi UFJ Trust and Banking Corp chief forex manager Hideaki Inoue. The Federal Reserve said in its Beige Book survey that 'overall economic activity contracted further or remained weak,' although in some districts there were some signs that the downturn may be easing.

Other US data showed industrial output slumped to a decade low in March and annual inflation turned negative for the first time in 54 years.

A slowdown in Chinese economic growth, to just 6.1 percent in the first quarter of the year, further dampened demand for higher risk assets.

Markets were waiting for fresh leads from the United States including housing figures and bank earning results.

'In the event of poor results, the greenback could fall below 97 yen,' Tsuyoshi Ueda, a senior dealer at Gaitame.com, told Dow Jones Newswires.

Traders were digesting a report by US President Barack Obama's administration that concluded that China had not manipulated its currency to have a competitive advantage, but that the yuan remained undervalued.

Against Asian currencies, the dollar fell to 1.4976 Singapore dollars from 1.5036 a day earlier, to 35.38 Thai baht from 35.46 and to 47.65 Philippine pesos from 47.91.

The greenback slipped to 1,329.55 South Korean won from 1,337.05 and to 10,709 Indonesian rupiah from 10,805, while holding steady at 33.77 Taiwan dollars.