NEW YORK, Aug 6 (Reuters) - Bridgewater Associates said

in a commentary sent to investors on Tuesday that it believes

the sell-off in Japan's equities the previous day was

exaggerated and that the stocks remain somewhat attractive,

according to two sources familiar with the letter.

According to the sources, the $112.5 billion global macro

hedge fund wrote that, in their opinion, the sell-off looked

overdone relative to the change in fundamental conditions.

Bridgewater did not immediately respond to a request for

comment on the analysis shared with investors.

On Monday, the Nikkei sank 12.4% in its biggest

daily sell-off since the 1987 Black Monday crash, after a job

data report on Friday showed a higher-than-expected U.S.

unemployment rate, raising concerns about a recession in the

world's largest economy.

On Tuesday, Japan's benchmark index rebounded strongly and

closed up 10.2%.

Investors also started to unwind yen-funded trades that had

been used to finance the acquisition of stocks for years after a

surprise Bank of Japan rate hike last week, exacerbating market

moves.

Bridgewater said in the commentary it considered Monday's

brutal sell-off to be shallow and short-lived, not representing

major changes in fundamental conditions.

A stronger yen after the Bank of Japan raised interest rates

last week and a lower rate of growth in developed markets make

conditions for Japan's stocks less supportive, but Bridgewater

said the unwind of the yen carry trade exacerbated the move.

The hedge fund told its investors that it continues to view

Japanese equities as somewhat attractive.

Bridgewater did not disclose if it was actively involved in

the yen carry trade.

MACRO FUNDS

Global macro hedge funds such as Bridgewater trade across

equities, fixed income and commodities in different geographies,

betting on global trends.

This strategy along with managed futures funds or commodity

trading advisers (CTAs) was a strategy most affected by the

recent unexpected rally in the yen, according to hedge fund

research firm PivotalPath, as the funds had sizeable bets

against the Japanese currencies.

In the Aug. 1 to Aug. 5 period, global macro quantitative

funds posted losses between 1.5% and 2.5% because of their short

yen positions, PivotalPath's exposure model calculations showed.

After losses of over 2% in July, those funds are down between 4%

and 5% year-to-date, after posting gains of almost 8% in April.

The drawdown will make a recovery before the year-end more

challenging for those funds, according to Jon Caplis, chief

executive officer at PivotalPath.

"A lot of global macro managers going into this year were

pounding the table that these (market) dislocations would be

very beneficial to them and they would be able to take advantage

of these opportunities. Unfortunately, I think you're going to

see some disappointment," he said.