* Dollar steadies after risk appetite boost a day earlier
* Investors hesitant on fresh positions before U.S. jobs data
* Japan political uncertainty keeps intervention caution high
* Aussie slips on smaller-than-expected trade surplus
* Japan investment trusts sell overseas assets - trader
By Rika Otsuka
TOKYO, Sept 2 (Reuters) - The dollar was on the defensive on
Thursday, retaining most of the losses sustained the previous day
when upbeat data helped lure investors away from safe-haven
currencies and assets.
Figures released on Wednesday showed the U.S. manufacturing
sector grew faster than expected and China's factory output
regained momentum in August, while Australia's economy expanded
at its fastest pace in three years in the second quarter.
[]
That lifted stocks, commodities and higher-yielding
currencies.
But investors hesitated to take fresh positions ahead of the
European Central Bank's policy meeting later in the day and
Friday's monthly U.S. jobs report, a trader said.
"Investors are not aggressively taking risks yet, feeling
they need to see the U.S. employment figures before deciding how
much risk they can really take," said Shuichi Kanehira, head of
FX spot trading at Mizuho Corporate Bank.
The euro inched down 0.1 percent to $1.2794 <EUR=>, having
risen as high as $1.2856 the previous day.
The next target for the euro is around $1.2873 -- a 38.2
percent Fibonacci retracement of its fall from its August peak of
$1.3334 to its August low of $1.2588. The target after that would
be $1.2923, touched on Aug. 18.
"The euro/dollar is expected to stay in the $1.2500-$1.3000
range that many players feel comfortable with," said a senior
trader at a big Japanese bank.
The dollar index, a gauge of the greenback's performance
against a basket of six major currencies, was steady on the day
at 82.513 <.DXY> after falling 0.8 percent on Wednesday, marking
its biggest one-day fall in six weeks.
Major support is seen at the Aug. 18 low of 81.912.
The dollar slipped 0.3 percent to 84.19 yen <JPY=>, moving
towards a 15-year low of 83.58 yen hit last week, beyond which
lies the record low of 79.75 yen struck in April 1995.
Managers of Japanese mutual funds, or toushin, sold overseas
assets as they expect a fall in Tokyo's Nikkei average to prompt
retail investors to cancel their toushin holdings, a trader at a
Japanese brokerage said.
The Nikkei rose 1 percent, having hit a 16-month low the
previous day. []
The euro fell 0.4 percent against the yen to 107.72 yen
<EURJPY=R> after jumping 1.4 percent the previous day.
The ECB is seen keeping its benchmark refinancing rate at 1.0
percent at Thursday's meeting. It is also expected to extend
lending support for banks despite raising its economic growth
forecasts as it seeks to balance a multi-speed recovery among the
16 countries in the euro zone. []
The Australian dollar fell 0.5 percent to $0.9066
<AUD=D4> after data showing Australia's trade surplus was A$1.888
billion ($1.72 billion) in July, below market expectations for a
surplus of A$3.1 billion. []
The Aussie hit a three-week high of $0.9117 on the strong
growth data on Wednesday.
INTERVENTION JITTERS
Traders said more players have started to wonder if Japanese
authorities might intervene in the currency market to rein in the
yen's strength even before it passes its all-time high against
the dollar.
Although many still believe the dollar's drop against the yen
would have to turn much more volatile or deeper for Japanese
authorities to step into the market, some now caution that Prime
Minister Naoto Kan could take action any time before Japan's
ruling Democratic Party holds a leadership vote on Sept. 14.
Party powerbroker Ichiro Ozawa, challenging Kan for the
leadership, said on Wednesday he would implement steps including
currency intervention if the yen rose rapidly. []
The race is seen as too close to call.
"Things would not look good for Kan if he does nothing,
letting the yen further appreciate," said Mizuho's Kanehira.
"Investor caution, or hope, towards Japanese intervention
is running high," he said.
($1=1.098 Australian dollars)
(Editing by Chris Gallagher)
