FOREX-Yen off three-week highs but markets still cautious on Syria
* Yen off three-week highs versus USD
* Markets still keeping a close eye on Syria
* Bounce in Brazilian real gives Asian EM currencies hope
By Ian Chua
SYDNEY, Aug 29 (Reuters) - The safe-haven yen on Thursday trimmed some of the recent chunky gains that had taken it to three-week highs against the dollar, while a rebound in the Brazilian real offered hopes that emerging market currencies in Asia may find a bit of a reprieve.
But markets are likely to stay on edge as the United States sketched out plans for multi-national air strikes on Syria that could last for days.
"We assume that NATO military action is still the likely scenario even if relatively limited in scope. Until there is more clarity, our bias is to keep positioning low at the moment," strategists at BNP Paribas wrote in a note.
The paring of yen positions also helped the euro edge off a 1-1/2 week low. The dollar last bought 97.70 yen, having risen from 96.81, while the euro traded at 130.34 yen , up from 129.66.
Against the greenback, the euro slipped to $1.3339 after losing grip of Wednesday's peak near $1.3400. That helped the dollar index climb back towards 81.500 from lows near 81.100.
The New Zealand dollar was a notable mover, rising to $0.7816 from a low of $0.7744.
Overall though, moves in major foreign exchange pairs have been modest compared to sharp and damaging moves in emerging market currencies.
First hit by an outflow of funds as investors positioned for an eventual end of easy money from the U.S. Federal Reserve, emerging market pain was exacerbated as heightened geopolitical risks made investors even more risk adverse.
Combined with local policy missteps, the poisonous mix that saw currencies such as the Indian rupee and Turkish lira hit record lows versus the dollar this week.
In the latest attempt to shore up its currency, India's central bank said it will provide dollars directly to state oil companies "until further notice".
Brazilian President Dilma Rousseff blamed the recent slump in the real on expectations that the Fed is on its way to tightening monetary policy. But she said Brazil has "large international reserves," which she suggested were "ammunition" that could help ease market volatility.
Brazil's central bank raised its main interest rate 50 basis points late Wednesday in part to shore up its currency.
Indonesia is expected to hike its benchmark rate at a meeting later in the day to help stabilise the rupiah.
With little clarity on Syria, economic news out of Asia will likely take a backseat. Australia will release second quarter capital expenditure and spending plans for the year at 0130 GMT, followed by the Philippines second quarter GDP data.
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