* China HSBC flash PMI hits 2-year high in January
* Aussie/yen edges higher afterwards, yen slips broadly
* Talk of hedge fund buying in dollar/yen, cross/yen -trader
* Post-BOJ drop in dollar/yen seen as temporary pullback
By Masayuki Kitano
SINGAPORE, Jan 24 The safe haven yen slipped and
the Australian dollar gained some support on Thursday as an
upbeat reading of Chinese manufacturing activity provided an
encouraging sign for the global economy.
The HSBC flash purchasing managers' index, a preliminary
private survey, showed that growth in China's factory sector
accelerated to a two-year high in January.
That provided support to regional equities and the
Australian dollar, and helped drag the yen lower, traders said.
The dollar rose 0.7 percent against the yen to 89.21 yen
, pulling away from a one-week low of 88.06 yen hit the
previous day. The dollar had hit a 2-1/2 year high of 90.25 yen
A trader for a Japanese bank in Singapore said there was
talk of dollar/yen and cross/yen buying by hedge funds.
The Australian dollar rose 0.3 percent versus the yen to
93.80 yen. Against the U.S. dollar, the Australian
dollar slipped 0.3 percent to $1.0524 but held above its session
low of $1.0513.
Investors had reduced short yen positions earlier this week
after the Bank of Japan was deemed to have disappointed by not
immediately upsizing its asset-purchasing programme. This was
despite the BOJ delivering its boldest policy yet to snap the
economy out of years of stagnation.
But the dollar's pullback versus the yen this week has
proved shallow so far and most are of the view that dollar/yen
will continue to climb over time.
"We saw a little clear out of short term speculative
positions, which is only healthy in an uptrend. I don't think
there's any change to the trend because of it," said Jesper
Bargmann, Asia head of G11 spot FX for RBS in Singapore.
With its drop to a one-week low on Wednesday, the dollar had
fallen more than 2 yen from a peak of 90.18 yen hit right after
the BOJ's announcement on Tuesday.
"I think we will struggle to break 91, but I will still keep
looking for us to trade above 90 in the short-term," Bargmann
said, referring to the outlook for the dollar versus the yen
over the next week or so.
Yen bears have not given up, partly because BOJ Governor
Masaaki Shirakawa, whose term ends in April, is seen likely to
be replaced with a more dovish governor, who could then bring
forward any easing.
"Dollar/yen looks vulnerable in the short-term, although its
longer-term outlook is still for an attack on 100 over the
coming year," said Steven Barrow, an analyst at Standard Bank.
Earlier on Thursday, the yen showed limited reaction to data
showing a larger-than-expected Japanese trade deficit in
December, and a record trade deficit for the whole of last year.
For 2012, Japan logged a record annual trade deficit of
6.927 trillion yen ($78.24 billion) as the sovereign debt crisis
in the euro zone and a territorial row with China hurt exports,
and the shutdown of nuclear power plants since the 2011
earthquake and tsunami pushed up energy imports.
Japan's trade deficits have been a contributing factor to
the bearish market sentiment against the yen, which has also
been pressured by expectations for more drastic monetary
stimulus from the BOJ.
The euro rose 0.6 percent against the yen to 118.75 yen
, edging back in the direction of a 20-month high of
120.73 yen set on Friday.
Against the dollar, the euro held steady at $1.3316.