TOKYO: The yen was a shade stronger across the board on Thursday but could see renewed pressure as buying linked to Japan's financial year-end looks to have peaked.
Although the last day for spot trading in the business year to March 31 was on Wednesday, real-money flows from Tokyo kept main currencies under pressure against the yen, with some exporters spotted selling the dollar in large amounts.
The yen's broad advance was driven mostly by its gains versus the biggest loser on the day, the Australian dollar, and picked up steam versus the greenback after stop-losses were triggered as the pair 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.
"As always, all hinges on America's economic data, but further dollar upside is not out of the question when new toushins are launched and life insurers' foreign bond buying gains momentum from April," she said.
The dollar bought 82.59 yen, down from Tuesday's high of 83.38. 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 0.2 percent softer against the yen, fetching 110.04 yen pulling away from this week's peak around 111.25.
AUSSIE DOWN UNDER
The Aussie dropped as much as 0.6 percent to 85.65 yen as China's bourses turned red on worries about a hard economic landing in the country, which is Australia's largest export market.
The Aussie also lost ground against the greenback, last fetching $1.0367, well off Tuesday's peak of $1.0557. 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.
On Wednesday, the Shanghai Composite Index fell 2.7 percent, posting its biggest fall since November. It was down a further 0.6 percent on Thursday.
Given these fears and distortions from year-, quarter- and month-end flows, the dollar-weakening effect of the Federal Reserve's chairman Ben Bernanke's recent comments has all but faded.
Early in the week, both the greenback and the yields on US bonds took a hammering after Bernanke gave a cautious outlook on the economy that kept alive expectations of further stimulus.
The dollar index fell to a near one-month low of 78.770 on Tuesday, but has since recovered to 79.07. As a result, the euro has retreated from a high of $1.3386 to $1.3327 currently.
Investors will closely watch the outcome of Italian bond sale as Rome aims to sell up to 8.25 billion euros of debt.
A report on Wednesday showed banks in Italy and Spain have been stocking up on government bonds, while others have cut corporate lending, suggesting the flood of ECB cash has yet to bolster flagging businesses in the wider economy.