* Yen rises to 4 1/2-month high vs dollar
* Commodity currencies hit hard on China worries
* Uncertainty on China policies worries investors
* Fed minutes lift euro, yen vs dollar
By Hideyuki Sano and Ian Chua
TOKYO/SYDNEY, Jan 7 (Reuters) - The yen hit multi-month highs against its peers on Thursday while commodity-linked currencies took a fresh hit after China guided the yuan lower for two days in a row, fuelling anxiety about China's economy and its policy intentions.
The dollar dropped as much as 0.7 percent to 117.66 yen JPY= , a level last seen in late August. The Australian dollar fell more than 1 percent to a three-month low of 82.80 yen.
The People's Bank of China set its official yuan midpoint rate 0.5 percent weaker than Wednesday's fix and its biggest daily fall since last August, when Beijing surprised global investors with an abrupt near 2 percent devaluation of the currency. yuan CNY=CFXS was at 6.5811 in early trade, 256 pips away from the previous close.
The move sparked speculation that the Chinese authorities are engineering a weaker yuan to support exports, after surveys on economic activities in China published so far this year pointed to further slowing in the economy.
"It's been known that China's economy is not in a good shape. What markets don't like above all is that there is no telling what the Chinese central bank is trying to do on the yuan," said Teppei Ino, currency analyst at Bank of Mitsubishi-Tokyo UFJ in Singapore.
Adding to worries about China, Chinese share prices .CSI300 plunged 7 percent soon after the open, leading to a nation-wide trading halt for the second time this week.
The uncertainty on China led traders to sell the Australian dollar, often used as a liquid proxy for China plays.
The Aussie fell to a two-month low of $0.7025, having shed more than three percent since the start of new year.
Likewise, its New Zealand peer plumbed a one-month low of $0.6615 NZD=D4 and a three-month trough of 77.82 yen.
Markets regained some stability after the offshore yuan erased early losses of up to 1 percent after suspected intervention by the authorities.
Still, selling pressure could mount again if China's foreign reserve data, due later in the day, shows large capital outflows out of the country.
The dollar slipped 0.2 percent 98.97 against a basket of major currencies .DXY .
The euro firmed 0.3 percent to $1.0815 EUR= after investors saw a slightly dovish slant in minutes of the Federal Reserve's December meeting.
The minutes showed some policymakers expressing concerns inflation could get stuck at dangerously low levels even as they decided to raise interest rates. Reserve Vice Chairman Stanley Fischer said four rate hikes this year is close to his expectations, but added that global uncertainty could still upset this scenario.