* Cross/yen and Aussie extend falls after China data
* Players lock in profits after Aussie jobs data
* RBNZ keeps rates steady, reiterates to hold till mid-year
* Speculation of BOJ loosening monetary policy persists
By Satomi Noguchi
TOKYO, March 11 (Reuters) - The yen rose on Thursday after data showed China's economy grew at a brisk pace while inflation picked up, adding to expectations that the country will take more monetary tightening steps and let the yuan rise.
The yen climbed as traders cut their long positions in other higher-yielding currencies after the data showed Chinese consumer inflation rose more than expected in the year to February, helping the Japanese currency to cut some of the losses it suffered the previous day.
The Australian dollar extended its fall against the greenback and the yen after the strong China data, following initial drops on numbers showing a smaller-than-expected rise in Australian employment.
"Cross/yen pairs fell after strong Chinese data suggested a greater chance that China will take monetary tightening steps. But no panic was felt in the market," said a senior prop trader for a Japanese bank.
Traders also said the Aussie's downward stretch could be brief with market players still expecting the Australian central bank to raise interest rates in coming months.
Australian employment barely rose in February as hiring took a breather after a very strong run, though the jobless rate remained low at 5.3 percent and full-time employment showed healthy growth.
"The Australian economy is basically strong and the central bank is leaning towards raising rates. So the data seems to have been taken as a factor for profit-taking in the Aussie, but the market remains in favour of the currency," said Hideki Hayashi, a global economist at Mizuho Securities.
The dollar fell 0.3 percent to 90.25 yen, having climbed as far as 90.83 on trading platform EBS on Wednesday, its highest in two weeks.
But gains in the yen were expected to be limited after sources told Reuters that the Bank of Japan may ease monetary policy as early as next week as it remains under government pressure to help pull the country out of grinding deflation.
The euro edged down 0.1 percent to $1.3636 after rising 0.4 percent on Wednesday, dragged down by its fall against the yen. It dropped 0.4 percent to 123.07 yen.
Sterling dipped 0.1 percent to $1.4955 after an unexpected drop in British industrial production data for January released the previous day.
The Australian dollar fell as far as $0.9113 before standing at $0.9120, down 0.3 percent on the day. The Aussie is off a seven-week high of $0.9193 hit on Wednesday, its highest since Jan. 20, according to Reuters data.
The Aussie slipped 0.6 percent to 82.25 yen.
The New Zealand dollar declined after the central bank said there was no urgency to lift rates off their current record lows, dashing expectations of an early start to rate rises or an aggressive tightening cycle. The Reserve Bank of New Zealand (RBNZ) kept interest rates steady at a record low and reaffirmed plans to hold them there until around the middle of the year.
The kiwi fell 0.5 percent to $0.6984. (Additional reporting by Anirban Nag in Sydney and Kaori Kaneko in Tokyo; Editing by Joseph Radford)