China stocks fall, prompting investors to cut yen shorts * Focus on what Fed will say about Treasuries buying scheme * Talk of dlr/yen selling related to Treasury coupon payments By Satomi Noguchi TOKYO, Aug 12 (Reuters) - The yen rose against the dollar on Wednesday as Chinese shares tumbled and prompted investors to further liquidate yen short positions ahead of a policy statement from the U.S. Federal Reserve later in the day. The Shanghai Composite Index .SSEC fell 3 percent on the day due partly to waning investor confidence in the market after a heated rally of more than 90 percent since the start of the year peaked at a 14-month high last week. Falling Chinese stocks dented demand for riskier currencies and prompted investors to cut long positions in higher-yielding currencies such as the Australian dollar. Uncertainty about the overall market reaction to the Fed's policy decision later on Wednesday also made investors cautious about keeping big positions, traders said. "The currency reaction after the Fed is hard to predict. But one thing that is certain is that long positions that had been stretched are now looking vulnerable to liquidation," said Shuichi Kanehira, head of FX spot trading at Mizuho Corporate Bank. The dollar fell 0.5 percent to 95.55 yen JPY= compared with late U.S. trading on Tuesday. There was some talk of dollar-selling by Japanese investors repatriating funds related to $27 billion in coupon payments on U.S. Treasuries due on Aug. 15. In addition, $61 billion in coupon securities will mature on the same day. Traders also said the dollar's jump to an eight-week high near 98 yen late last week following better-than-expected U.S. employment data was overdone, and investors were now cutting dollar long positions versus the yen. "The recovery story has been pushed hard, very hard, and it makes sense to see this momentum unwind a little," said Adam Carr, senior economist at ICAP, Sydney. "Particularly when there are plenty of equity analysts running around arguing strong moves to date don't reflect fundamentals." The euro fell 0.5 percent to 135.19 yen EURJPY=R and the Australian dollar dropped about 1 percent to 78.74 yen AUDJPY=R. The Australian dollar fell 0.7 percent to $0.8245 AUD=D4, while the euro was steady at $1.4151 EUR=.

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