* Aussie and Kiwi main gainers as sell-off pauses
* Dollar inches up against yen, holds above Monday’s 7-week low
* Turkish central bank stems tide by calling emergency meeting
* Fed meeting may be next trigger for emerging worries
By Patrick Graham
LONDON, Jan 28 (Reuters) - The dollar regained a firmer footing against the yen on Tuesday as investors took a breather from a sell-off of stocks and emerging market assets that has driven money into traditional safe haven currencies.
European shares opened higher after three days which have knocked 3.5 percent off the MSCI world stock index and hammered the developing world’s more fragile economies including Turkey, Argentina and Ukraine.
That has benefited the euro, dollar, yen and Swiss franc while hurting currencies more closely linked to commodity prices and growth in emerging markets like China, such as the Australian dollar.
The Aussie, helped by an upbeat business survey, and the New Zealand dollar both recovered around 0.7 percent against their U.S. counterpart on Tuesday.
The main factor halting the sell-off, broadly a response to the prospect of tighter monetary policy in the developed world, were signs of a potential policy response from Turkey at an emergency central bank meeting later on Tuesday.
But with the U.S. Federal Reserve expected on Wednesday to signal it will continue to rein in its huge bond-buying programme this year, analysts said any respite may be brief.
“When one central bank takes action to stem the tide, that will tend to have a knock-on effect for the others,” said Stephen Gallo, FX strategist at BMO Capital Markets in London.
“But with the Fed message tomorrow unlikely to be dovish, I wouldn’t rule out another move (later this week).”
The yen still tends to be investors’ first choice as a safe haven for their money in times of stress and it hit a seven-week high against the dollar on Monday. The dollar recovered about a third of a percent on the day in early European trade.
Some players have been playing the Aussie and Kiwi off against each other in recent weeks, judging the Australian currency’s fall to be nearing an end and hikes in New Zealand interest rates to be largely priced in.
There are broad worries over how the Australian economy will hold up in the face of slackening commodity markets and a slowdown in China, but the NAB measure of business conditions jumped to its highest in more than 2-1/2 years in December.
The Aussie dollar rose to $0.8796, pulling away from Friday’s low of $0.8660, its lowest level since July 2010.
Sterling has rebounded from a dip at the end of last week and growth numbers will provide the latest stimulus for the market after a run of data that has prompted many investors to bring forward their expectations of a first rise in UK interest rates.
Several banks said that only a number that fell short of forecasts for a 0.7 percent expansion on the quarter would be enough to knock sterling out of a positive trend that has seen it threaten 2008 highs against the dollar above $1.66.
It traded up 0.2 percent at $1.6610 in early trade.
“Most investors seem to think that a GDP number broadly in line with the market forecasts should keep markets betting on early BoE exit from monetary stimulus,” Citibank said in a morning note. “This should continue to support sterling.”