* Yen firms against dollar and euro
* Risk appetite hit after disappointing global PMI surveys
* Euro defensive as ECB policy meeting looms
By Ian Chua
SYDNEY, Oct 2 (Reuters) - The safe-haven yen held onto solid gains early on Thursday after disappointing manufacturing surveys from around the globe triggered a run on risk, while the euro stayed defensive as a policy review by the European Central Bank loomed.
The euro slid to a three-week low of 137.39 yen, the dollar retreated to 109.08 from a six-year peak of 110.09, while the Australian dollar briefly dipped below 95.00 for the first time in seven weeks.
Investors warmed to the Japanese currency after a slew of surveys showed German factory activity shrank for the first time in 15 months, China’s manufacturing sector barely grew, while 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 $1.2625, having drifted in a slim $1.2583/1.2640 range on Wednesday. It hovered just above 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.
Aussie bears will look to building approvals and trade data due at 0130 GMT before giving the downside another go.
Overall though, the market is looking at the prospect of another listless session in Asia with several major centres including China and Hong Kong closed for public holidays.
Investors are also unlikely to want to take big positions ahead of the closely watched U.S. payrolls report on Friday and amid the ongoing pro-democracy unrest in Hong Kong. (Editing by Shri Navaratnam)