SINGAPORE/SYDNEY: The yen edged higher against the dollar on Thursday, staying on firm footing after staging a surprise bounce the previous day as an initial sell-off in reaction to the Bank of Japan's monetary easing fizzled.
Commodity currencies were mixed, with the Aussie dollar weighed down by a lacklustre reading on Chinese manufacturing activity, while the New Zealand dollar was supported by upbeat domestic data.
The US dollar fell 0.1 percent to 78.29 yen, having retreated from a one-month high of 79.23 set on Wednesday after the BOJ boosted its asset-buying programme to help fuel the country's economic recovery.
"Technically, yesterday was a bit of a surprise. The reversal now suggests that we are back where we were... So I think we will see a bit more of the range trading," said Andrew Robinson, FX analyst for Saxo Capital Markets in Singapore.
Rather than pushing on towards 80 yen, the dollar seems likely to trade in a range of roughly 77 yen to 79 yen over the next week or two, Robinson said.
Traders said the dollar's rally against the yen the previous day had stalled due to profit-taking by players who had recently piled up bearish bets against the yen, and also due to stop-loss buy backs of the Japanese currency.
The dollar's rise on Wednesday stopped short of technical resistance near 79.27 yen on the daily Ichimoku chart, a popular technical analysis tool, and also below the 200-day moving average near 79.32 yen.
While the dollar's failure to clear such technical resistance could bode ill for its outlook, its downside may be limited as well, said a trader for a European bank in Tokyo.
"With regard to dollar/yen, I don't think there is much reason to sell the dollar on the downside, since there is wariness toward the potential for intervention," he said.
Jitters about the potential for yen-selling intervention by Japanese authorities had increased after the dollar hit a seven-month low of 77.13 yen on trading platform EBS last week, pressured by the US Federal Reserve's announcement of aggressive monetary stimulus.
YEN RISES
The yen rose broadly and pulled away from troughs hit the previous day. The euro fell 0.4 percent to 101.86 yen , down from Wednesday's peak of 103.63 yen. The Australian dollar slid 0.6 percent to 81.54 yen.
The Aussie dollar also fell against the US dollar, shedding 0.6 percent to $1.0417, coming under pressure after a survey of factory managers showed that China's factory activity remained sluggish. An initial survey of manufacturing activity only ticked up in September from a nine-month low hit in August.
The Aussie dollar is sensitive to Chinese data as China is Australia's single largest export market.
The New Zealand dollar fared better compared to the Aussie dollar, supported by data showing New Zealand grew at a healthy 0.6 percent in the second quarter, double the expected pace.
The New Zealand dollar held steady at $0.8258, having risen to $0.8303 earlier on Thursday.
The euro fell 0.3 percent to $1.3010, stuck below a four-month peak near $1.3173 reached on Monday.
Investors are waiting to see if Spain will seek a bailout and activate the European Central Bank's bond-buying programme, and a near-term focal point is an auction of Spanish bonds coming up later on Thursday.
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