* Yen falls after BOJ increases asset purchase
* Dollar/yen may rise further may struggle around 80 yen
* Greater risk appetite helps euro
By Jessica Mortimer
LONDON, Sept 19 (Reuters) - The yen fell to one-month low against the dollar on Wednesday after the Bank of Japan eased monetary policy more than expected, but with other central banks also easing, its losses may be limited.
This encouraged investors to take on more risk which helped the euro edge higher against the dollar.
The dollar jumped to 79.23 yen, its highest since Aug. 22, after the BOJ's decision. This took it well above a low of 77.13 reached last week.
The BOJ increased asset purchases by 10 trillion yen. This followed aggressive monetary easing by the U.S. Federal Reserve and a European Central Bank plan to buy bonds of indebted states.
But analysts said the yen's falls could be limited given the Fed easing has put the dollar under broad selling pressure while global economic worries may temper risk appetite.
The euro traded around a cent below Monday's four-month high as analysts said its sharp rise following the action by the ECB and Fed may have been overdone.
"The effect on the yen was negative, as you'd expect as 10 trillion was more than the market was looking for. The real test for dollar/yen is whether the current move can carry it above 80 yen," said Niels Christensen, currency strategist at Nordea in Copenhagen.
"I think it will run out of steam as you need very good numbers out of the U.S. and risk appetite to maintain pressure on the yen."
BOJ Governor Masaaki Shirakawa said after the decision that Japan's economic recovery may be delayed by six months due to a prolonged slowdown in global growth.
The dollar could extend gains if it breaks above its 200-day moving average at 79.32 yen, though it could face resistance at the August high of 79.66 and the psychological 80 yen level.
A repeat of the yen's sharp fall in February-March, when the dollar hit 84.187 yen in the wake of surprise easing by the BOJ, is seen unlikely as both the ECB and the Fed are viewed as having eased more aggressively.
"The ECB has an unlimited bond buying programme while the Fed has an open-ended easing scheme so the market will soon ask whether the BOJ's easing would be more effective than the others, or less," said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp in Tokyo.
The euro was up 0.2 percent at $1.3072 but stayed below Monday's high of $1.31729, its strongest since early May.
Given that the euro had rallied some 9 percent since late July, traders said the pullback reflected some mild profit-taking as markets waited to see whether Spain would apply for aid and trigger the ECB's bond-buying programme.
While many market players expect Spain to eventually ask for bailout, some say investors' patience could be tested as Madrid is likely to resist tough conditions which some northern euro zone countries would want imposed in return for any aid.
Spain's deputy prime minister, Soraya Saenz de Santamaria, said on Tuesday the government was still considering the terms of a bailout.
The euro was expected to remain broadly in favour, however, as the ECB's plans to tackle the euro zone debt crisis have encouraged investors to pare back aggressive short positions.
The single currency was up 0.5 percent at 103.34 yen , near Monday's four-month high of 103.858 yen. The British pound hit a four-month high of 128.81 yen.
Westpac analysts advised buying the high-yielding Australian dollar against the yen after the BOJ decision, with a target of 84 yen that could extend to 84.70/80 yen, compared with the current 82.67 yen.
"The Bank of Japan has lent fresh support to otherwise range-bound AUD/JPY ... A broadly positive global risk environment should underpin the pair overall," they said in a note to clients.