* Yen broadly firmer in otherwise lacklustre session
* Risk appetite curbed by Wall Street's decline, China
* Aussie underperforms among major currencies
By Ian Chua
SYDNEY, March 12 The yen held onto gains early
on Wednesday while investors kept their distance from risk
currencies such as the Australian dollar amid worries about
China's economic health and following a late fall on Wall
An absence of major economic data and fresh market-moving
news saw traders take their cue from stock market moves,
although the euro was briefly unsettled after a European Central
Bank official warned the bank could still ease if needed.
ECB Vice President Vitor Constancio was also reported as
saying markets had not fully taken in the point the ECB made
last week when it emphasized on the slack in the euro zone
His comments saw the euro cede ground against the U.S.
dollar and yen. It last traded at $1.3857 and 142.67 yen
, nursing losses of up to 0.4 percent. Still, the
common currency was not far from a 2-1/2 year high of $1.3915
set last week.
The pullback in the euro helped the U.S. dollar index edge
up to 79.788, away from a four-month trough of 79.433
plumbed last week. But the greenback struggled versus the yen,
dipping to 102.97 from Tuesday's high of 103.43.
The yen tends to outperform the other major currencies in
times of heightened market stress, particularly against
commodity currencies such as the Australian dollar.
Further working against the Aussie were concerns about a
slowdown in Chinese economic growth and a recent slide in the
price of iron ore, Australia's biggest export earner.
"Focus seemed to have shifted away from Ukraine and back to
China this week, with metals prices collapsing on concerns
stemming from China and in turn undermining commodity sensitive
G10 and EM currencies," analysts at BNP Paribas wrote in a note
The confluence of negative factors saw the Aussie slide 0.7
percent against the yen to 92.39. On the greenback,
it was once again below 90 U.S. cents.
"There are a lot of questions around China's situation right
now: is industrial and consumer demand fading, are we about to
see further defaults across the financial spectrum, is the
credit crunch about to resurface," said Evan Lucas, strategist
at IG in Melbourne.
"All of these macro issues are feeding into China hysteria.
What is compounding the situation is the emergence of how much
copper and ore is being used as collateral."
In contrast, the New Zealand dollar was remarkably steady at
$0.8472. It also barely gave way to the broadly firmer
yen at 87.16.
Traders said investors were reluctant to sell the kiwi given
the Reserve Bank of New Zealand (RBNZ) is widely expected to
hike interest rates on Thursday.
A Reuters poll this week showed the RBNZ is set to raise
rates by 25 basis points and lay out a path for a series of
further increases, taking the lead among developed economies in
The Bank of Thailand, on the other hand, is likely to cut
interest rates later in the day to help Southeast Asia's
second-largest economy cope with prolonged political unrest in