* Dollar slips vs yen after stops triggered below 97.50 yen
* Sterling at 1-1/2 month high post BoE Inflation Report
* Markets price in earlier-than-expected sterling rate hikes
* Fed tapering talk gains momentum, to help dollar
By Anooja Debnath
LONDON, Aug 7 (Reuters) - The dollar fell against the yen on Wednesday on expectations Japanese investors would convert their overseas earnings before the mid-August Obon holiday.
Against the U.S. currency, sterling rose to its highest since late June after Bank of England governor Mark Carney's comments were perceived as less dovish than expected causing markets to price in an earlier interest rate hike.
The pound was last up 0.7 percent at $1.5446, recovering smartly from the intra-day low of $1.5205 plumbed shortly after the Inflation Report, where the BoE tied future rate rises to a drop in unemployment.
Despite slipping against the yen and sterling, overall the dollar found support from Federal Reserve policymaker Charles Evans' comments that the central bank will probably scale back bond buying later this year.
The dollar index was flat at 81.607, moving away from the intra-day low of 81.481.
The yen, which is sought after as a safe-haven currency, made broad-based gains against major currencies as global stock markets fell. Japanese stocks dropped nearly 4 percent.
"When the equity market falls like that it is a risk aversion move... that triggered yen buying," said Adam Myers senior FX strategist at Credit Agricole.
The dollar came under pressure as a break of 97.50 yen sparked stop-loss dollar selling, which pushed it to a low of 96.76 yen on trading platform EBS, its lowest level since late June. It was last down 0.5 percent at 97.29 yen.
The euro was also down 0.5 percent at 129.39 yen.
Businesses in Japan shuts for a couple of weeks around mid-August for the Obon holidays and markets participants expect yen demand from Japanese investors to rise ahead of big capital inflows around the same time from interest payments on the country's massive U.S. Treasury holdings.
"There are some expectations that investors will redeem, repatriate or convert earnings, whether they be dividends or coupons back into yen before the Obon holidays," said Neil Jones, head of hedge fund FX sales at Mizuho Corporate Bank.
"It is the fear of the flow rather than the actual flow that is causing yen strength. What it is doing is that it is causing investors around the world to cut long dollar/yen positions."