SINGAPORE: The yen edged up versus the dollar on Thursday but still hovered close to a 7-month low, with the dollar supported by demand from Japanese importers.
The greenback took a breather from its recent rally against the Japanese currency, having climbed 5.4 percent from lows hit in early February.
The dollar dipped 0.2 percent to 80.15 yen, but still remained close to the previous day's high of 80.406 yen hit on trading platform EBS, the dollar's highest level since July.
In the near-term, the dollar may be poised for a bit of a pullback after its recent rally, said a trader for a major Japanese bank in Tokyo.
"Timing-wise, I think the rally may be about to end for now, although it's hard to say at what level it will stop," he said.
"Maybe the dollar will rise to 81 yen in overseas trading hours and that could be it for now, or we could even start to see the dollar turn heavy from current levels," he said, adding that it wouldn't be surprising to see the dollar pull back around a yen or so in the short term.
Part of the reason for the yen's weakness is the Bank of Japan's surprise easing last week and growing momentum as key support levels give way, spurring more selling in the Japanese currency.
Another Tokyo-based trader said dollar bids from Japanese importers helped support the dollar against the yen.
With oil prices having hit a nine-month high this week, major Japanese oil importers such as power companies need larger amounts of dollars to buy oil.
There was also talk of Canadian dollar-buying against the yen related to Japanese trading house Mitsubishi Corp's purchase of a stake in a Canadian gas field. Mitsubishi has agreed to pay C$1.45 billion ($1.45 billion) for the stake in the gas field in a deal that will be finalised later this month.
After the yen's recent retreat, the dollar is now testing strong technical resistance on the weekly Ichimoku chart.
The dollar has not managed to stay above the weekly Ichimoku cloud for any sustained period since mid-2007.
The dollar has clawed above the bottom of the cloud at 79.73 yen, and faces more resistance at the cloud top, which comes in at 80.94 this week.
STERLING STRUGGLES
Sterling struggled to make headway after minutes of the Bank of England's February policy meeting were more dovish than expected.
The BoE minutes showed two officials sought a bigger increase this month in quantitative easing than was eventually agreed. This was seen as raising the chances of more asset-buying to support a fragile economy.
The pound was steady at $1.5672, struggling to regain ground after shedding 0.7 percent on Wednesday.
The euro held steady at $1.3254, showing resilience even after PMI surveys on Wednesday suggested the euro zone might slide back into recession and amid lingering doubts over Greece's recently hard-won bailout deal.
The euro faces resistance near $1.3307, its 100-day moving average.
"EURUSD remains fairly bid largely due to both the short squeeze seen in EUR crosses, particularly EURCAD, EURAUD, EURNZD and potentially reserve managers recycling their USD revenues into euros as oil prices rise," analysts at BNP Paribas wrote in a note.
The Australian dollar touched a fresh three-week low of $1.0597 earlier on Thursday. It later trimmed its losses and was steady from late US trade on Wednesday at $1.0634.
Analysts said the rise in oil prices on worries over Iran's growing confrontation with the West has also increased worries about global growth, another reason weighing on commodity currencies.
So far, the market has ignored a bitter leadership crisis for Australia's struggling minority government. No one seriously expects this will affect the country's economic outlook, which is heavily reliant on China's voracious demand for its resources.
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