By Patrick Graham
LONDON (Reuters) - The yen inched higher on Thursday as investors' sought safe havens in the face of a shaky atmosphere on stock markets, though major currency pairs were otherwise little changed ahead of a round of central bank meetings.
The Bank of Japan and U.S. Federal Reserve both meet next week. They are preceded on Thursday by Swiss National Bank, which kept its expansive monetary policy intact, and the Bank of England, which is expected to do nothing extra for now.
A busy day of U.S. and UK data, however, should give traders food for thought on the relative chances of another cut in British interest rates before the end of the year - and of a rise by the Fed.
The yen move came despite an easing of the tensions on bond markets which have dominated the past week. Traders said sales of emerging market currencies by CTAs - largely model-based quantitative funds - continued to dominate trading by the bigger desks.
"Despite yesterday's stability in global bonds, FX seems to be trading risk-off," said Richard Benson, co-head of portfolio management at London-based currency fund Millennium Global.
"The problem with CTA money is that they are model-based so once they flick a switch it can go on for days. Clearly they had large exposures in emerging FX and that has been unwinding."
Concerns about the policy effectiveness of the world's major central banks have triggered a steepening trend in bond yields since last Thursday and the yen's gains also looked like a vote against the Bank of Japan's ability to weaken the currency.
Sources familiar with the BOJ's thinking said the central bank will consider making negative interest rates the focus of its future easing by shifting its prime policy target to interest rates from base money.
There is no consensus in the BOJ yet on whether to deepen negative rates at the Sept. 20-21 meeting, when it conducts the comprehensive assessment of its policies, the sources said.
"They are just running out of firepower and everyone knows it," said the head of currency and fixed income trading at one major U.S. asset manager in London, asking not to be named.
"I am a 95 yen (per dollar) man."
The dollar edged down 0.2 percent to 102.24 yen
"I was a bit surprised yesterday. I thought the yen might have been a little stronger, due to the risk-off mood," said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.
"But maybe the BOJ news had an effect. It's hard to say what will happen next week," he said.
The Fed also meets on Sept. 20-21, and contrasting comments from U.S. policymakers have led to uncertainty about the monetary outlook.
While U.S. interest rate futures indicate expectations for an actual rate increase next week remain low, the dollar could get a lift from anything in the Fed's statement that hints at a hike this year.
The euro edged down slightly to $1.1224
The dollar index, which tracks the U.S. unit against a basket of six major rivals, was a touch higher at 95.508 (DXY), after wobbling in a narrow range this week between a low of 94.935 on Monday and a high of 95.672 on Tuesday.
Sterling dipped 0.2 percent to $1.3218
Switzerland's central bank on Thursday held its negative interest rates at record low levels despite mounting criticism that the policy has hurt banks and pensions.