The yen was a shade stronger across the board on Thursday but could come under renewed pressure as buying linked to Japan's financial year-end is set to peak out this week. The last day for spot trading in the business year to March 31 was on Wednesday, but real-money flows from Tokyo still kept main currencies under pressure against the Japanese unit, with exporters spotted selling the dollar in large amounts.
Still, analysts say the dollar has held key levels in the face of repatriation flows and expect the yen buying to end followed by its further weakness in the months to come. The yen's advance was driven mostly by its gains versus the biggest loser on the day, the Australian dollar, and it picked up steam versus the greenback after stop-losses were triggered as the pair shortly breached a recent support level. "Despite the year-end deals going through and dovish comments from the Fed's Bernanke, we're seeing the dollar is resilient against the yen," said Sumino Kamei, senior currency analyst at the Bank of Tokyo-Mitsubishi UFJ in Tokyo.
The dollar bought 82.66 yen, down from Tuesday's high of 83.39. It hit the session low of 82.54 after triggering stop-losses below its Wednesday's low of 82.61, traders said. The currency has held above 82.60 throughout most of the week and traders said that should it close below the level on Thursday, a retest of the 81.87-97 support area was likely.
Chart resistance for the pair loomed at the tenkan line of 83.04. The line has proved an important technical indicator during the dollar's 7.3 percent rise against the yen in 2012. The euro was also 0.3 percent softer against the yen, fetching 110.06 yen pulling away from this week's peak around 111.25.
The Aussie dropped as much as 0.6 percent to 85.64 yen as China's bourses posted heavy losses for a second straight day on resurfacing jitters on a hard economic landing in the country, which is Australia's largest export market. The Aussie also lost ground against the greenback, last fetching $1.0362, well off Tuesday's peak of $1.0558. It was down 0.3 percent on the day and came within shouting distance of the 2-1/2 month low of $1.0336.
"With the Chinese stock markets under pressure, the outlook on AUD will unlikely turnaround until we see some confirmation that the Chinese economy is not weakening too much and which should be affirmed by the release of the Chinese PMI (on Sunday)," said analysts at BNP Paribas. The dollar index fell to a near one-month low of 78.770 on Tuesday, but has since recovered to 79.12. As a result, the euro has retreated from a high of $1.3386 to $1.3317 currently.