LONDON: The dollar found a footing against the yen on Thursday after three volatile days in which investors taking profit on this year's gains for the U.S. currency pushed it back roughly 3 percent.
The major currency pairs were broadly steadier, with New Zealand's dollar falling back from an almost two-week high of $0.7872 hit after the central bank surprised markets by saying it was still looking at raising interest rates again.
Another policy decision, the Swiss National Bank's keeping of all its parameters steady, prodded the franc higher, while Norway's central bank surprised by cutting its key policy rate, driving the crown to its weakest since mid-2009.
In Europe the day's other big event risk comes from the second tranche of the European Central Bank's programme of targeted cheap loans for banks. A low volume of loans would raise expectations the bank will move ahead with outright government bond-buying early next year and weaken the euro.
"We're definitely moving into the end of year zone," said Adam Cole, global head of FX strategy at RBC Capital Markets in London.
"On the yen a lot of money managers are still long dollars and that clearly creates some pressure for them to cash in some of those positions before the end of the year. So the vulnerability may still be to the downside."
The dollar has pulled back from a seven-year peak of 121.86 yen set on Monday as crowded long-dollar trades were thinned out. It touched a two-week low near 117.45 yen earlier on Thursday but in early European deals was up 0.4 percent at 118.28 yen.
"It's very, very choppy," said Stephen Innes, senior trader for FX broker OANDA in Singapore. Innes said some market players now saw an opportunity to buy the dollar against the yen in the wake of its drop over the past few days.
"My feeling is we've cleaned out a lot of people right now," he said, referring to the paring back of long dollar positions, and added that the dollar may start to attract some bids ahead of the U.S. Federal Reserve's policy meeting next week.
The euro held steady near $1.2447, having recovered from a 2-year low of $1.2247 set on Monday.
Despite the dollar's pull-back this week, traders said its broad longer-term uptrend remained intact and would probably resume next year, especially as speculation on the timing of an interest rate hike by the Federal Reserve heats up.
The franc rose around 20 ticks to a day's high of 1.2012 francs per euro after the SNB decision.
"(There was) no pro-active action on negative interest rates," said Ipek Ozkardeskaya, analyst at Swissquote, Geneva. "Given the (chances of) aggressive European Central Bank (monetary) expansion, the 1.20 floor is still a challenge."
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