Yen holds firm after Wall Street wobble, hits fresh highs vs euro

By Ian Chua

SYDNEY (Reuters) - The yen was broadly firmer early on Friday, having hit a fresh 2-1/2 year high on the euro thanks in part to renewed demand for the safe-haven Japanese currency as Wall Street snapped a three-day rally.

The euro fell as far as 125.595 yen, bringing into view the June 2013 trough of 124.940. It last stood at 125.870. The dollar slid towards 113.00 yen, but was still some way off a 15-month low near 111.00 set last week.

Traders said a fresh fall in oil prices had unsettled equity markets, prompting the flight to safety flow.

The euro also lost ground on the greenback, slipping to a two-week low of $1.1071. It has since drifted back above$1.1100.

Not helping the common currency, minutes of the European Central Bank's January meeting showed some policymakers advocated the need to act pre-emptively in the face of new threats to growth.

In contrast, San Francisco Fed President John Williams said the U.S. central bank should stick with its plan to raise interest rates gradually, adding his outlook has changed little since December.

The diverging policy pathways between major central banks have been highlighted as a cause for heightened market volatility.

Other major currencies were more subdued, though the Australian dollar fared remarkably well even after Thursday's disappointing jobs report.

It was just a shade softer at $0.7150, having found support after several attempts to push it below $0.7130 failed.

Sterling managed to firm slightly as markets hope a deal can be reached at a summit where Britain is seeking more favourable terms for its EU membership.

Prime Minister David Cameron appealed to EU leaders to help him settle the question of Britain's European Union membership for a generation by agreeing a "credible" deal he can sell to the British public to stay in the bloc.

The pound came within a whisker of $1.4400 overnight as it pulled further away from Wednesday's trough of $1.4235. The euro dipped below 77.50 pence, retreating from a one-year high near 79.00 pence set a week ago.

"We will be watching the outcome of the EU Leaders' Summit on Friday for a successful UK deal, with most officials expressing optimism at the start of the meetings on Thursday," analysts at BNP Paribas wrote in a note to clients.

"This would allow EURGBP to unwind some of the Brexit risk premium that has been recently been into the cross."

There is little in the way of market-moving economic news out of Asia on Friday, leaving the focus on the outcome of the EU Summit.

(Editing by Shri Navaratnam)