* Yen strength persists as risk trades unwound
* Dollar hits 6-wk low and euro 9-month low vs yen
* Aussie rises as Q4 CPI almost guarantees rate hike in Feb
* Caution on China, ahead of FOMC, earnings, Obama's speech
By Kaori Kaneko
TOKYO, Jan 27 (Reuters) - The yen firmed broadly on Wednesday
as investors remained jittery about risk-taking, with the focus
still on China's efforts to curb lending and the outcome of a
Federal Reserve policy meeting later.
But the Australian dollar climbed against the U.S. dollar
after local data showed a rise in consumer prices, reinforcing
views that the Reserve Bank of Australia will hike rates in
February. [] []
News of artillery fire between North and South Korea briefly
weighed down the dollar and euro against the yen, a reaction
traders said stemmed from a dip in South Korea's share market.
Talk that Japanese exporters sold dollars also helped send
the greenback to a six-week low on the yen, while the euro,
continuously pressured by fiscal concerns in the euro zone, hit a
nine-month low against the Japanese currency.
The market has plenty to keep it jittery. The Fed ends a
two-day meeting on Wednesday which is expected to yield little in
terms of a policy shift but comes as the market waits to see if
Chairman Ben Bernanke will be confirmed in his post for a second
term. His current term expires on Sunday. [].
"Market sentiment is tilted toward further reluctance to take
risks, with several factors at play including news related to
China's tightening," said a trader at a Japanese bank.
The market is closely watching China's steps to rein in
credit and prevent inflation and potential asset bubbles, with
investors nervous the measures could also curb growth and demand
for exports from other economies.
The Industrial and Commercial Bank of China, the country's
largest bank, said on Wednesday it has stopped rolling over some
loans to slow credit growth after a surge at the start of the
year, though it will not halt new lending. []
The dollar fell 0.4 percent to 89.25 yen <JPY=>. It had
dropped as low as 89.14 yen on trading platform EBS, its weakest
level since mid-December.
There was some talk of both bids and stop-loss offers at
levels around 89.10 yen and 89.00 yen.
The euro shed 0.6 percent to 125.45 yen <EURJPY=R>, after
falling as far as 125.30 yen, a fresh nine-month low.
President Barack Obama is also scheduled to deliver his State
of the Union address, while a number of key U.S. companies are
due to unveil earnings for the fourth quarter later on Wednesday.
[] [].
Last week, Obama proposed sweeping reforms to curb risky
lending by banks, which spooked financial markets.
YEN AND DXY RISE
Both the dollar and the euro dipped below technical support
against the yen. The dollar fell below 89.30 yen, a 50 percent
retracement of its rise from the November 2009 14-year low of
84.82 yen up to its peak earlier this month of 93.78 yen.
The euro slipped below 125.67 yen, a 50 percent retracement
of its rise from a trough hit in January 2009 up to a peak marked
in June 2009. Market players said the next downside target could
be levels near its April 2009 low of 124.38.
Traders said speculators were using this nervous environment
to pare some long positions in higher-yielding currencies.
"We expect the FOMC to leave guidance that rates are likely
to remain exceptionally low for an extended period unchanged," JP
Morgan said in a note.
"Until then, markets will tread lightly, with risky markets
likely biased lower until uncertainties are clarified."
Both the dollar and the yen, currencies used to fund
investment in higher-yielding assets, have rallied in the past
couple of weeks, while global equities <.MIAPJ0000PUS> including
emerging market shares <.MSCIEF> have fallen.
The dollar index <.DXY> <=USD> edged up 0.1 percent to
78.507. The index, which measures the dollar's value against six
major currencies, closed above its 200-day moving average on
Tuesday for the first time since May 2009.
The euro <EUR=> dipped 0.1 percent to $1.4062 from late U.S.
trading on Tuesday.
The Australian dollar climbed 0.2 percent to $0.9003 <AUD=D4>
after the fourth-quarter consumer price index rose a little
faster than forecast, almost guaranteeing a rate hike next week.
(Additional reporting by Anirban Nag in Sydney, Masayuki Kitano
in Tokyo; Editing by Joseph Radford)
