The safe-haven yen pulled away from multi-week peaks against major currencies on Thursday after the European Central Bank official hinted at the possibility of more bond-buying, but an upcoming Italian debt sale posed more risks to jittery markets.
The Australian dollar shot up more than half a percent against the dollar and the yen after unexpectedly strong local employment figures eased worries the Australian economy could suffer from slower global growth.
Traders took profits on the Japanese unit which gained the previous session as riskier assets remained pressured with the eurozone debt woes back in focus and Spanish bond yields still close to a four-month high and the crucial six percent level.
The yen eased 0.1 percent helping the dollar climb back to 80.90 yen, up from a six-week low at 80.57, while the euro rose to 106.30 yen from Wednesday's trough of 105.45. The yen was sold by model and macro funds, traders said.
"Some players have bought the yen back on resurfacing euro worries, but this is likely to be nothing more than a correction to the broader weak yen trend," said Teppei Ino, a currency strategist at Bank of Tokyo-Mitsubishi UFJ in Tokyo.
Euro/yen was poised to make a decisive move on the charts, trapped above support at the 200-day moving average at 105.86 yen and resistance at the top of the Ichimoku cloud at 106.29, with 55-day moving average at 106.41 posing more resistance.
Giving some respite to riskier assets, ECB Executive Board member Benoit Coeure said the scale of market pressure on Spain is not justified and the ECB still has its bond-buying programme as an option.
"A suggestion by an ECB board member that they could reactivate the SMP (Securities Markets Programme) facility helped to bring calm to a feverish Spanish bond market," said Sebastien Galy, strategist at Societe General.
Still, with the dollar funding rates in Europe stable, the euro has been resilient, reaching a one-week high of $1.3158, before retreating to $1.3136. That kept it well within the $1.3030-$1.3165 range trodden in the past week.
The Aussie rose to as high as $1.0373 from around $1.0305, hitting its highest level in more than a week after Australian employment surged past all expectations in March while the jobless rate stayed at a low 5.2 percent.
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