SYDNEY/TOKYO: The yen struggled at two-week lows against the dollar on Thursday, with wary speculators taking a pre-emptive move just in case the Bank of Japan surprises this week by easing policy.
The market also gave the Australian dollar a wide berth, but left the euro pretty much alone against the greenback as investors waited for the outcome of the European Central Bank meeting due at 1145 GMT.
The dollar bought 78.47 yen, flat from late U.S, levels but not far from Wednesday's high of 78.585, a level last seen on Sept. 19. The euro fetched 101.38 yen, not far off a peak of 101.46 set overnight.
The BoJ, which only last month boosted its asset-buying programme, has been under intense political pressure to offer more stimulus to spur growth and weaken the yen.
Analysts generally expect the BOJ to stand pat at the Oct. 4-5 meeting to gauge the effects of its latest easing, but pressure is expected to stay on ahead of its next policy meeting on Oct 30 when it will also have an economic review.
Economy Minister Seiji Maehara said on Wednesday he would like to talk to the BOJ to push the central bank to achieve its de facto inflation target, noting he is entitled to attend the BOJ's policy meeting if he wants to.
"It may take a while before the BOJ will actually do something. Still, market players are speculating about more easing and you have to consider which side of position you should take under such conditions," said Katsunori Kitakura, associate general manager of market making at Sumitomo Mitsui Trust Bank.
The US currency was also helped by fairly upbeat US economic data on Wednesday, including larger-than-expected increase in private-sector jobs and improvement in the service sector.
The dollar's index against a basket of currencies held at 79.90, flat on the day but not far from three-week high of 80.147 hit on Monday.
REAL MOVER IN MADRID
Against the greenback, the euro was at $1.2914, almost unchanged from late US levels and stuck in a $1.2800/3000 range as investors look to when Spain will seek a bailout and trigger the ECB's recently announced bond-buying programme.
The European Central Bank is expected to hold interest rates when it meets on Thursday to allow time for new details on the health of the euro zone economy and for Spain to ask for aid.
"With very little expected for this ECB meeting, the real market mover for the euro may be the Spanish bond auctions," said Mary Nicola, a strategist at BNP Paribas.
"Today's Spanish bond auctions will provide a litmus test for the market's perception on Spain."
Madrid is looking to raise up to 4 billion euros ($5.2 billion) by selling three bonds maturing 2014, 2015 and 2017.
The euro hit a fresh 3 1/2-month high against the Australian dollar, which is also slipping near last month's trough against the US dollar.
The Aussie slipped after data showed Australian retail sales edged up only marginally in August, although it was not far from market expectations.
Mounting signs of slowdown in China, Australia's main trade partner, prompted Australia's central bank to cut interest rates this week and leave the door ajar for more.
This had given investors the greenlight to sell the Aussie dollar, which fell further to a fresh one-month low of $1.0182 . It last stood at $1.0195, down 0.2 percent.
While its Sept low of $1.0165 is seen as a strong resistance level, a break there is likely to open the way for a test of parity against the dollar.
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