* 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 (Reuters) - 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 to clients.
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 expectations.
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 pro-democracy protests. (Editing by Shri Navaratnam and Eric Meijer)