Asian stocks fell on Wednesday as investors worried global growth was faltering, while the euro held near a 7-week high as investors pared long positions in the dollar on doubts about the resiliency of the U.S. recovery.

A rebound in world stock markets on Tuesday, mainly propelled by bargain-hunting, turned out to be short-lived as data showed growth in the U.S. service sector was slowing, the latest evidence that its expansion was cooling.

Wall Street managed modest gains despite the data, but strong buying interest disappeared by afternoon as bearish sentiment reasserted itself. <.N>

Investors are not wholly confident about the global economic outlook. Recent weaker-than-expected U.S. data is weighing on sentiment, said Y.S. Rhoo, a market analyst at Hyundai Securities in South Korea.

The MSCI index of Asia Pacific shares outside Japan <.MIAPJ0000PUS> shed almost 0.8 percent, resuming its decline after the previous day's rally, which had been largely spurred by gains in the beaten-down Shanghai market and an upbeat assessment of the region's economic outlook from Australia's central bank.

The MSCI index has lost nearly 9 percent so far this year.

Shanghai stocks <.SSEC> fell 0.6 percent, a day after gaining nearly 2 percent on hopes that money will move back into the oversold market after the completion of Agricultural Bank of China's mammoth $22.2 billion initial public offering, which will be the world's largest.

The Shanghai market, the world's second-worst performer after Greece, has lost 27 percent since the start of the year after Beijing took a range of steps to cool surging property prices.

Japan's Nikkei average <.N225> fell 0.9 percent as shares of exporters which had gained the day before gave back some of the gains, but the index remained above a seven-month low hit on Tuesday.

There's little short-covering left today because investors already moved to cover short positions yesterday after the Nikkei managed to avoid breaking below the 9,000 level, said Kenichi Hirano, operating officer at Tachibana Securities.

The verdict has yet to be reached, but a sense of relief could spread if the Nikkei were to be able to keep above that level, despite confusion in Europe, a slowdown in America and volatile currency moves.

The euro hovered near $1.2600, with near-term resistance around the May 21 high of $1.2670 and support forming at the July 2 low of $1.2480.

The single currency rose to as high as $1.2662 on Tuesday, gaining nearly 0.7 percent.

The dollar index <.DXY> edged up 0.1 percent to 84.151, staying near a two-month low of 83.825 hit this week.

The dollar was steady against the yen at 87.49 yen, not far from a seven-month low of 86.96 yen hit on EBS last week. The yen has made solid gains against the greenback in recent sessions on growing worries about an economic slowdown in the United States and falling stock markets <.SPX>.

The Australian dollar was firm above 85 U.S. cents, having jumped over 1 percent on Tuesday.

Meanwhile, spot gold rose as much as $3.60 to $1,195.85 an ounce, regaining strength after falling to a six-week low in the previous day.

U.S. crude prices rose 17 cents to $72.15 per barrel, pulling away from a four-week low hit on Tuesday as traders bet on a further decline in U.S. oil inventories.

(Editing by Kim Coghill)