* RBA cuts cash rate by a quarter point to 3 pct as expected
* Euro down from 7-mth high vs yen overnight
By Lisa Twaronite
TOKYO, Dec 4 (Reuters) - The dollar and euro slipped against a resurgent yen on Tuesday after U.S. manufacturing activity hit a three-year low in November, while the Australian dollar held its gains after the Reserve Bank of Australia cut its cash rate in line with expectations.
Data released on Monday by the Institute for Supply Management (ISM) showed U.S. manufacturing activity surprisingly contracted in November, dropping to its lowest level in more than three years.
The report dragged down shares across Asia and sapped investors' risk appetite.
"The perceived strengthening of the U.S. economy was one factor pushing up the dollar in recent weeks," said Masashi Murata, senior forex strategist at Brown Brothers Harriman.
"Ahead of Friday's U.S. nonfarm payrolls report, which could show that job growth is slowing, the dollar is easy to sell," he said.
Continuing concerns about the U.S. "fiscal cliff" also added to the perceived safe-haven appeal of the yen.
The White House dismissed a proposal from congressional Republicans on Monday to avert the $600 billion worth of tax increases and spending cuts, saying it did not meet President Barack Obama's pledge to raise taxes on the wealthiest Americans.
The dollar shed about 0.2 percent to trade at 82.07 yen after earlier dropping as low as 82.04 yen, moving further away from a 7-1/2 month high of 82.84 yen hit last month.
The yen has slipped in recent weeks on expectations of pressure on the Bank of Japan for further easing following a Dec. 16 election, campaigning for which officially began on Tuesday.
Shinzo Abe, leader of the main opposition Liberal Democratic Party (LDP) is the front-runner to be Japan's next prime minister, has called on the BOJ to take more drastic easing steps. His suggestions included setting an inflation target of 2 percent, embarking on "unlimited easing", or even cutting interest rates to zero or below.
"The yen weakened because of Abe, but the short-term story is over. Traders trade every day, the market moves every day, and there is a limit to how long the market can keep trading on the same factors day after day," said Kimihiko Tomita, head of foreign exchange for State Street Global Markets in Tokyo.
"Abe has opened up many issues for discussion, but it remains to be seen how many of them will come to pass," he said.
The yen's rise against the dollar on Tuesday also bolstered it against the euro, with some investors locking in gains after the European unit rose on Monday on positive news on the region's debt crisis.
Spain formally requested European funds to recapitalise its banking sector, pushing down Spanish and Italian bond yields as investors became more confident about buying euro zone debt. Greek bonds rallied after the announcement of details of a debt buy-back.
Against the yen, the euro slipped about 0.2 percent to 107.16 yen, after rising to a seven-month high of 107.67 yen on Monday.
The euro last stood at $1.3058, steady from late U.S. levels on Monday, when it rose as high as $1.3076, its highest level since Oct. 22.
Australia's central bank cut its main cash rate a quarter point to a record-matching low of 3.0 percent on Tuesday following its monthly policy meeting. That brought the easing since May to 125 basis points and matching the trough hit during the darkest days of the global financial crisis.
Against the U.S. dollar, the Aussie rose 0.2 percent to $1.0428.
The Aussie hit its session high of $1.0454 after the RBA announcement, which market participants said was priced in to most positions. But it remains well shy of a two-month high of $1.0491 hit last week.
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