LONDON: The yen edged down on Friday as comments from a Federal Reserve policymaker helped revive some appetite for risk, with investors focused on a speech later by Fed chief Janet Yellen.
European stocks, oil and peripheral euro zone bonds, rebounded after being hammered this week, while the safe-haven Japanese currency lost ground.
The riskier Australian dollar gained 0.5 percent to trade at 93.58 yen.
Having hit an 11-month high against the euro on the previous day, the yen retreated 0.3 percent against the single currency to 136.55 yen per euro, and was down 0.2 percent against the dollar.
Comments from James Bullard, head of the St. Louis Federal Reserve Bank, had already helped settle markets late on Thursday.
He said that given a fall in inflation expectations, the Fed may want to keep up its bond-buying stimulus for now.
"Judging from the equity markets today, and the relative stability in FX and elsewhere, I think markets are judging (Bullard's comments) as making it more likely that the Fed will once again come to the rescue," said Derek Halpenny, European head of global markets research at Bank of Tokyo-Mitsubishi UFJ.
But Halpenny added that Bullard's comments would only have a temporary impact.
Ultimately it would be the data that would determine the path of US interest rates.
Sterling was an early mover in European trade, falling about 0.4 percent after the Bank of England's chief economist Andrew Haldane said it could hold off with a first rise in interest rates for longer than previously thought.
But the pound later steadied, with the market comforted by Haldane's comments that markets might be right to bet that UK rates will be hiked some time in the middle of next year.
Valentin Marinov, head of European currency strategy at Citi in London, said Haldane's comments could justify the view that rates would only start to rise in the second half of next year, but that expectation had now largely been priced into sterling.
DOLLAR LOWER
The dollar has climbed steadily across the board since mid-July but is on course for its biggest two-week loss since September last year after a fortnight of worry over global growth and its impact on the outlook for US interest rates.
Only the yen was up against the dollar among major currencies on Friday.
"Wall Street halting its slide has helped the dollar for now (against the yen), but it's difficult to say whether risk aversion has gone away.
I see it more as a natural rebound by the dollar," one trader at a large Japanese bank in Tokyo said.
"The dollar fell so much against the yen that it was bound to bounce sometime." The greenback edged down 0.2 percent against the euro to trade at $1.2833 and was down 0.2 percent at 84.775 against a basket of major currencies.
Sentiment towards the euro remained fragile but southern European bond markets steadied after some initial sales, supporting the euro. Worries over a new round of debt troubles, spurred by the impact of a lack of growth and inflation on government finances, have driven much of the past week's selling.
But it all comes in the context of the planned end of the Fed's programme of bond-buying this month.
Yellen will speak about 'Economic Opportunity' at separate events later on Friday.
Media reported this week that the Fed chief had expressed continuing confidence in the US recovery.
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