* Yen firms vs dollar on profit-taking on greenback's rally
* Risk appetite hit by disappointing global PMI surveys
* Euro stages modest rebound as ECB policy meeting looms
By Lisa Twaronite and Ian Chua
SYDNEY, Oct 2 The safe-haven yen held its gains
against the dollar on Thursday after weak manufacturing surveys
from around the globe triggered a run on risk.
The euro, meanwhile, staged staged a modest rebound ahead of
a policy review by the European Central Bank as investors took
profits on the dollar's recent gains.
The dollar index dropped about 0.4 percent to 85.630,
pulling away from a four-year high of 86.218 touched on Tuesday.
The index has marked 11 straight weekly gains.
The dollar retreated 0.2 percent to 108.65 yen from
the previous session's six-year peak of 110.09, while the
Australian dollar briefly dipped below 95.00 yen for
the first time in seven weeks.
"Some investors, including some hedge funds are using this
as an opportunity to take profits," after the dollar's rally
against the yen, said Kaneo Ogino, director at Global-info Co in
Tokyo, a foreign exchange research firm.
But investors including Japanese importers were buying on
dips, supporting the dollar around 108.50 yen, he said.
Investors warmed to the Japanese currency after surveys
showed German factory activity shrank for the first time in 15
months, China's manufacturing sector barely grew, and the United
States slowed more than expected.
The reports cast a pall on investor confidence, knocking
global stocks lower and boosting demand for safe-havens such as
the yen and government bonds.
U.S. Treasury yields fell sharply as a result, with the
10-year yield sliding below 2.40 percent to its
lowest in nearly a month. That in turn undermined the allure of
the greenback against a host of currencies, apart from the euro.
The common currency last traded at $1.2653, up about
0.2 percent, and pulling away from a two-year trough of $1.2571
plumbed on Tuesday.
While the ECB is not expected to cut interest rates, it will
present details of a new asset-buying plan that it hopes will
help revive the flagging euro zone economy and see off the
spectre of deflation.
"Bottom line for the euro is that (ECB President Mario)
Draghi needs to convince investors that ECB action will be large
enough to boost inflation expectations, and that policy
responses will continue to escalate if inflation expectations
were to fall further," analysts at BNP Paribas wrote in a note
The Australian dollar managed to bounce back above 87 U.S.
cents, from an eight-month low of $0.8663. It came
within a hair's breadth of its 2014 trough of $0.8660 on
Wednesday after local retail sales data fell short of
Investors are expected to remain cautious ahead of the
closely watched U.S. payrolls report on Friday, and are also
warily monitoring developments in Hong Kong's ongoing
(Editing by Shri Navaratnam and Eric Meijer)