The yen weakened across the board on Tuesday as investors waded back into risky carry trades, sparked by moderate gains in global equities and a rise in commodity prices.

The Australian dollar in particular was a strong performer in the wake of firmer metal prices and stronger-than-expected building approvals data in Australia for November.

The U.S. dollar, meanwhile, steadied against a basket of major currencies. Analysts said much of the bad news on the world's biggest economy has already been priced into the market and U.S. pending home sales data due at 10 a.m. would need to much worse than the slight fall expected by economists to spark a fresh bout of dollar selling.

We're seeing a bit of a move into carry trades because equity markets are looking steadier and commodity prices are higher, said Shaun Osborne, chief currency strategist at TD Securities in Toronto.

Investors using the risky carry trades borrow low-yielding currencies such as the yen to buy higher yielding ones including the Aussie and New Zealand dollar.

U.S. stock futures were up early on Tuesday, buoyed by news of a reshuffle at Starbucks Corp., prompting currency investors to sell the low-yielding yen and buy currencies with high interest rates such as the Australian and New Zealand dollars.

In early New York trading, the dollar was up 0.1 percent at 109.32 yen, but still well below the 114 yen level seen just before the new year. The euro rose 0.3 percent against the yen to 160.82 yen.

The yen had benefited at the start of the year as poor U.S. jobs data and falling equity markets led to heightened risk aversion.

The Australian dollar rose 1.1 percent to 96.30 yen, and gained 1 percent versus the U.S. dollar to trade at US$0.8797, cheered by gold prices hitting record highs above $870 an ounce and data showing strong growth in Australian building approvals.

Canada, another gold producer, also saw its currency strengthen versus the U.S. dollar, which last traded at C$1.0014.

The dollar index was steady to slightly lower at 76.088.

Despite worries about a U.S. economic slowdown, and possibly even a recession, risk appetite recovered a little on Tuesday, cheered by gains in European equity markets.

We had a lot of risk aversion in the market at the start of the year, and it appears there has been some profit-taking on this ... with the yen weakening somewhat, said Niels From, currency strategist at Dresdner Kleinwort in Frankfurt.

The euro rose 0.2 percent to $1.4711, pulled up by its gains against the yen, but remained below Friday's five-week high of $1.4824.

Weaker-than-expected euro zone retail sales data for November did not alter expectations that the European Central Bank will leave interest rates on hold this week.

In the United States, many market players believe the Federal Reserve is likely to cut rates by a hefty half percentage point at its late January meeting to 3.75 percent, even though inflation remains a concern for policy-makers.

Federal Reserve Bank of Philadelphia President Charles Plosser acknowledged inflation risks in a speech on Tuesday, saying price pressures in the face of slower economic growth will pose a challenge for monetary policy this year.

(Editing by Tom Hals)