* Dollar near Monday's 2-1/2 year high vs yen
* Yen's downtrend seen intact
* Aussie dollar supported by upbeat Australian data
By Masayuki Kitano
SINGAPORE, Jan 29 The dollar inched lower versus the yen on Tuesday but hovered within sight of a 2-1/2 year high hit a day earlier, while the Australian dollar rose on data showing a rebound in Australian business confidence.
The dollar slipped 0.2 percent to 90.71 yen, but was not very far from the previous day's high of 91.26 yen, the greenback's strongest level versus the Japanese currency since June 2010.
The greenback fell as low as 90.40 yen earlier, pressured by dollar-selling, possibly from Japanese exporters, ahead of the 0100 GMT Tokyo fixing. Traders also cited dollar offers from options players.
The dollar however, later gained some support versus the yen as Tokyo shares bounced, traders said. Upbeat sentiment toward risky assets can weigh on the yen, especially against higher-yielding currencies.
"I still think dollar/yen will head higher," said a trader for a European bank in Tokyo. "In the near term, I think the dollar will trade between 90 yen to 92 yen," he said.
Selling the yen has been a one-way trade since mid-November, based on expectations that Japanese Prime Minister Shinzo Abe would push the Bank of Japan into more forceful monetary easing to beat deflation.
"Everyone is only thinking about where to buy (the dollar) on dips," said a trader for a Japanese bank in Bangkok, referring to the dollar versus the yen.
The Australian dollar rose 0.3 percent to $1.0448, boosted by a survey showing Australian business confidence rebounded sharply in December.
The euro slipped 0.2 percent against the yen to 121.92 yen , staying below Monday's high near 122.90 yen, the euro's strongest level against the Japanese currency since April 2011.
Against the dollar, the single currency fell 0.1 percent to $1.3438, inching away from an 11-month high of $1.3480 set on Friday on trading platform EBS.
The euro had gained a boost late last week on news about euro zone banks' early repayments of three-year loans to the European Central Bank, which suggested that parts of the euro zone banking system may be on the mend.
The euro, however, faces a series of major resistance levels near $1.35, including its 2012 high of $1.34869, the 50 percent retracement of its May 2011 to July 2012 drop near $1.3491, and the psychologically important $1.3500 level.
Sterling held steady at $1.5700, having hit a five-month low near $1.5675 on Monday.
Sterling has been weighed down by worries about a weak UK economy. Recent comments from incoming Bank of England Governor Mark Carney that there was still scope for monetary policy to do more in the developed world, have also dented the pound.
Carney, who now heads the Bank of Canada, takes up his post at the Bank of England later this year.
"The prospect of more activist monetary policy is not exactly an encouraging one for GBP, certainly not as it comes on top of a host of other negative developments - an economy that is triple-dipping, a government that is struggling to cut its deficit, and soul-searching about the UK's role within the EU," wrote analysts at JPMorgan in a note.
Trending On Reuters
Construction firm Larsen & Toubro Ltd reported a quarterly profit well below analysts' estimates, as several of its local infrastructure orders were deferred, leading to a decline in domestic business. Full Article