* Dollar, euro sharply higher vs yen after overnight rally
* Fed's new interest rate projection awaited
SYDNEY, Jan 25 (Reuters) - The yen hovered at one-month lows against the dollar in Asia on Wednesday, having suffered its biggest one-day fall since October's intervention after a break of technical levels forced sellers into the market.
Traders though expect little follow-through selling in Asia with several centres including Hong Kong and China still shut for the Lunar New Year holidays and as the outcome of the Federal Reserve's policy meeting looms.
Speculation that Japanese data due at 2350 GMT would show the export-driven economy posting a trade deficit last year -- the first in more than three decades -- provided an excuse to dump the yen on Tuesday.
That saw the dollar break past 77.10 to reach 77.84 yen , the highest level since Oct 31 when Japan's massive yen-selling intervention drove the greenback to a high around 79.50.
"The sharp weakness for JPY was the key development as the short term risks suggest additional follow-through," wrote analysts at JPMorgan.
"Note that USD/JPY extended above key resistance in the 77.50 area as the focus turns to the important 78.23 December high. A break of that peak would imply a shift back to the medium term range highs near 79.55."
The move could ease the threat of an official intervention, which had kept dollar/yen stuck in a narrow range roughly between 76.60 and 77.20 in the last three weeks.
The yen even fell against the embattled euro in a move that saw the single currency climb to a one-month high near 101.30 , well off an 11-year trough around 97.00 plumbed on Jan 16.
The euro fared reasonably well against the dollar after EU data showing a surprising strength in manufacturing and services this month held out hope the euro zone may escape recession.
Portugal also eased market jitters after its prime minister said the country was not seeking to renegotiate or extend its 78 billion euros bailout from its creditors.
The single currency stood at $1.3030, little changed from late New York levels and not far off a three-week peak of $1.3062 struck Tuesday.
However, with no definite outcome on Greece's debt swap talks and the threat of the country's ratings being cut to 'selective default' by Standard & Poor's, the euro's outlook remains uncertain.
Commodity currencies also fared relatively well with the Australian dollar at $1.0481, still within easy reach of a three-month peak of $1.0574 set earlier in the week.
Australia reports inflation data later Wednesday that could well open the way for another cut in interest rates at the Reserve Bank of Australia's (RBA) next meeting on Feb. 7.
Upbeat earnings from Apple should also help keep risk appetite intact, further underpinning commodity currencies.
While the IMF has joined a growing rank of doomsayers predicting a global recession stemming from Europe's debt crisis, there is no doubt that market mood has improved recently.
Some players say this shift in sentiment can be attributed to the European Central Bank's injection of nearly half a trillion euros of three-year funds into the banking system last month.
Along with another offering of such cheap money next month, this could buy the region more time to solve its debt crisis.
Meanwhile, the Fed will begin a new practice of announcing policymakers' interest rate projections when a two-day meeting ends on Wednesday.
Economists polled by Reuters expect the Fed will signal that it is unlikely to start hiking interest rates until the first half of 2014, more than five years after chopping them to near zero.
"Our economists believe that this will likely reveal a more dovish Fed than the market expects. In FX, this, combined with a potential downside surprise to U.S. GDP on Friday, suggests some downside pressure for USD crosses," analysts at Barclays Capital wrote in a client note.
* Fed's new interest rate projection awaited
SYDNEY, Jan 25 (Reuters) - The yen hovered at one-month lows against the dollar in Asia on Wednesday, having suffered its biggest one-day fall since October's intervention after a break of technical levels forced sellers into the market.
Traders though expect little follow-through selling in Asia with several centres including Hong Kong and China still shut for the Lunar New Year holidays and as the outcome of the Federal Reserve's policy meeting looms.
Speculation that Japanese data due at 2350 GMT would show the export-driven economy posting a trade deficit last year -- the first in more than three decades -- provided an excuse to dump the yen on Tuesday.
That saw the dollar break past 77.10 to reach 77.84 yen , the highest level since Oct 31 when Japan's massive yen-selling intervention drove the greenback to a high around 79.50.
"The sharp weakness for JPY was the key development as the short term risks suggest additional follow-through," wrote analysts at JPMorgan.
"Note that USD/JPY extended above key resistance in the 77.50 area as the focus turns to the important 78.23 December high. A break of that peak would imply a shift back to the medium term range highs near 79.55."
The move could ease the threat of an official intervention, which had kept dollar/yen stuck in a narrow range roughly between 76.60 and 77.20 in the last three weeks.
The yen even fell against the embattled euro in a move that saw the single currency climb to a one-month high near 101.30 , well off an 11-year trough around 97.00 plumbed on Jan 16.
The euro fared reasonably well against the dollar after EU data showing a surprising strength in manufacturing and services this month held out hope the euro zone may escape recession.
Portugal also eased market jitters after its prime minister said the country was not seeking to renegotiate or extend its 78 billion euros bailout from its creditors.
The single currency stood at $1.3030, little changed from late New York levels and not far off a three-week peak of $1.3062 struck Tuesday.
However, with no definite outcome on Greece's debt swap talks and the threat of the country's ratings being cut to 'selective default' by Standard & Poor's, the euro's outlook remains uncertain.
Commodity currencies also fared relatively well with the Australian dollar at $1.0481, still within easy reach of a three-month peak of $1.0574 set earlier in the week.
Australia reports inflation data later Wednesday that could well open the way for another cut in interest rates at the Reserve Bank of Australia's (RBA) next meeting on Feb. 7.
Upbeat earnings from Apple should also help keep risk appetite intact, further underpinning commodity currencies.
While the IMF has joined a growing rank of doomsayers predicting a global recession stemming from Europe's debt crisis, there is no doubt that market mood has improved recently.
Some players say this shift in sentiment can be attributed to the European Central Bank's injection of nearly half a trillion euros of three-year funds into the banking system last month.
Along with another offering of such cheap money next month, this could buy the region more time to solve its debt crisis.
Meanwhile, the Fed will begin a new practice of announcing policymakers' interest rate projections when a two-day meeting ends on Wednesday.
Economists polled by Reuters expect the Fed will signal that it is unlikely to start hiking interest rates until the first half of 2014, more than five years after chopping them to near zero.
"Our economists believe that this will likely reveal a more dovish Fed than the market expects. In FX, this, combined with a potential downside surprise to U.S. GDP on Friday, suggests some downside pressure for USD crosses," analysts at Barclays Capital wrote in a client note.
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