FOREX -Yen slips, takes breather after rising on Ukraine jitters

Reuters

* Dollar/yen pulls up from previous day's 1-month low

* But concerns about Ukraine may keep yen supported

* Aussie eases after RBA says it remains high by historical standards

By Ian Chua and Masayuki Kitano

SYDNEY/SINGAPORE, March 4 (Reuters) - The yen slipped on Tuesday, taking a breather from its recent rally that was sparked by investors flocking to the safe-haven currency, but tensions over Russian military intervention in Ukraine were seen likely to lend it support in the near term.

The dollar edged up 0.2 percent to 101.60 yen, edging away from a one-month low of 101.20 yen set on Monday. The euro rose 0.2 percent to 139.56 yen.

Russian President Vladimir Putin's forces have tightened their grip on the Russian-speaking Crimea region, a move described by U.S. President Barack Obama as a violation of international law and of Ukraine's sovereignty.

Risk sentiment remained subdued due to the heightened geopolitical tensions, which has helped give the yen a lift in recent sessions.

"Unless Russia withdraws its forces, I think this is a topic that is likely to persist. It's probably a long road until there is a resolution, and sentiment will probably head gradually toward risk-off," said a Singapore-based trader for a Japanese bank.

The dollar could fall further against the yen if risk sentiment worsens further, although the yen's gains could be limited by speculation that the Bank of Japan might eventually step up its monetary stimulus, said Sim Moh Siong, FX strategist for Bank of Singapore.

"I think in the back of the market's mind...is always the backstop, in terms of BOJ," Sim said.

Many market participants expect the BOJ to take further easing steps at some point to achieve its 2 percent inflation target, although expectations for the central bank to act soon have faded recently as BOJ Governor Haruhiko Kuroda remains doggedly positive that the economy is improving.

"If the Ukraine situation escalates, and that leads to a global risk-off, and perhaps higher oil prices as well...Japanese policymakers would have to reassess the economic impact on Japan and that may prompt a policy response," he added.

The tensions over Russian military intervention on the Crimean peninsula have rattled oil markets, with U.S. crude rising to its highest settlement price in 5-1/2 months on Monday.

The euro held steady at $1.3730, having pulled back from a two-month high of around $1.3825 set on Friday, when data showed inflation held steady in the euro zone and cooled expectations the European Central Bank might ease monetary policy at its March 6 policy meeting.

A batch of encouraging U.S. economic data on Monday, helped lend support to the dollar.

U.S. factory activity rebounded from an eight-month low last month and consumer spending increased more than expected in January, suggesting the economy was regaining some strength after abruptly slowing in recent months.

"The overall tone of the data is optimistic with the major sentiment surveys surprising to the upside. Hence this should alleviate some of the weather-related concerns and be USD-supportive," JPMorgan analysts wrote in a note to clients.

Trading in the Australian dollar was somewhat choppy after the Reserve Bank of Australia kept interest rates steady at a record low of 2.50 percent, as widely expected, and reiterated that the most prudent course for policy was likely a period of stability.

The Aussie dollar rose to around $0.8970 or so right after the RBA decision, but later faltered after the RBA said in its post-meeting statement that the Australian dollar's exchange rate remains high by historical standards.

The Australian dollar was last down 0.1 percent on the day at $0.8925, but remained above a one-month low of $0.8891 that had been set on Monday.

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