* Aussie hits 1-yr high vs USD
* Yen retreats after rising on Fujii remarks on Wednesday
* Investor confidence supported by robust U.S. data
* BOJ upgrades assessment of Japanese economy
By Satomi Noguchi
TOKYO, Sept 17 (Reuters) - The dollar stayed on the defensive
on Thursday as investors added to long positions in growth-linked
currencies and lifted the Australian dollar to a one-year peak,
encouraged by growing evidence of a global recovery.
Asian stocks tracked Wall Street higher after U.S. industrial
production rose more than expected in August []
boosting sentiment towards riskier assets.
The sustained shift away from the U.S. dollar left the dollar
index <=USD> subdued at 76.226, near 1-year lows of 76.151 struck
on Wednesday and with charts pointing to a gradual fall to 2008
levels of around 70.70.
"Firm stocks suggest the dollar is probably set to slide for
another week," said Hideaki Inoue, chief manager of forex trading
at Mitsubishi UFJ Trust Bank.
The Australian dollar <AUD=D4> rose to a one-year peak of
$0.8757 with its next targets seen at $0.8813 and then $0.8907.
In early afternoon trade in Asia, the Australian dollar edged up
0.2 percent to $0.8743.
The New Zealand dollar <NZD=D4>, which advanced nearly 1.4
percent on Wednesday, was holding steady at $0.7134 with little
resistance seen until $0.7200.
The euro <EUR=> inched up 0.1 percent to $1.4729, hovering
near a one-year high of $1.4738 struck on trading platform EBS on
Wednesday.
The euro has now gained over 2.5 percent this month, riding
on improved investor confidence and expectations that U.S. rates
are likely to stay rock bottom for some time to come.
But the recent rally in the euro could run out of steam.
"With eight of the nine last sessions ending in euro rallies,
the upward trend is extremely stretched," said Matthew Strauss,
senior currency strategist at RBC Capital.
"In fact, euro valuations against the U.S. dollar are the
most extreme since May this year. The trend is your friend but
beware the technical correction."
The yen was broadly lower with the euro gaining 0.3 percent
to 134.20 yen <EURJP=R> and the Aussie climbing 0.4 percent to
79.63 yen <AUDJPY=R>.
The U.S. dollar also rose 0.2 percent to 91.10 yen <JPY=> as
some traders covered their short positions after it fell as far
as 90.12 yen on EBS the previous day, a 7-month low.
On Wednesday, the dollar's slide against the yen picked up
pace after Japan's Finance Minister Hirohisa Fujii said a strong
yen had advantages for the nation's economy.
Fujii also said he was opposed to currency intervention if
movements were gradual, while adding that currency moves were not
rapid.
The yen's rise against the dollar on Wednesday was small
despite Fujii's clear opposition to intervention, prompting
traders to think twice about buying the yen at the moment, some
traders said.
"Fujii was so clear about not intervening and he went so far
as to say a strong yen has merit. But the dollar's slide against
the yen ended up so small," said a senior trader for a Japanese
bank.
"That suggests to me there is a background that the yen is
missing its own fundamental reasons to be bought."
Reflecting investors' cautious views on the Japanese economy,
the market showed muted reaction when the Bank of Japan on
Thursday upgraded its assessment of the economy. The central bank
said improving exports and output heighten the chance the economy
will meet its forecast of a moderate pick-up early next year.
The BOJ kept interest rates on hold at 0.1 percent, as widely
expected, at its two-day policy meeting concluded earlier in the
day. []
Data releases pick up later in the day with retail sales for
August due in the UK while in the U.S., weekly jobless claims,
home starts and the Philadelphia Fed business activity index are
scheduled.
(Additional reporting by Anirban Nag in Sydney and Rika Otsuka
in Tokyo; Editing by Joseph Radford)
