* RBA says inflation to stay near 2.75 pct in near-term
* Yen soft on Nikkei report BOJ may consider asset buying
* Dollar index off 8-month low after profit-taking
By Hideyuki Sano
TOKYO, Oct 5 (Reuters) - The Australian dollar fell sharply on Tuesday after the Reserve Bank of Australia surprised traders by skipping a widely expected rate hike.
The Japanese yen was easier on the day but still not far from a 15-year high as the market looks to how much the Bank of Japan steps up its easing to deter the yen's strength.
The Australian central bank kept interest rates at 4.50 percent, while the market had priced in a 74 percent chance of a hike before the announcement.
The Australian dollar fell 0.9 percent to a one-week low around $0.9580, slipping further away from a two-year high of $0.9751 hit late last week.
Still, market players say that Australia's hefty yield advantage over other major currencies is likely to support the Aussie.
"We've had hawkish talk from the RBA lately so it was a bit of surprise. But it's not like rate hike expectations have been completely dashed. I suspect the Aussie will be supported around $0.95," said Ayako Sera, strategist at Sumitomo Trust Bank.
The derivative market is still pricing in another rate hike within a year.
In fact the spectre of a further rate increase is in stark contrast with many other developed countries, including the United States and Japan, where monetary easing is discussed to support feeble economic growth.
"The truth is investors want to buy many currencies (other than major currencies). But some currencies are illiquid and there's often regulation, which leaves the Australian dollar the best target for hot money," said Tsutomu Soma, senior manager of foreign securities at Okasan Securities.
The Aussie also slumped against the Japanese yen to around 80.00 yen, its lowest level in more than 10 days.
The U.S. dollar climbed about 0.2 percent against the yen to around 83.50 yen ahead of the outcome of a Bank of Japan policy meeting, which could come at any moment.
The Nikkei Japanese business daily reported on Tuesday that the Bank of Japan will consider expanding its asset purchases including asset backed securities.
If the BOJ only tweaks its money market operations and shuns larger asset purchases, the dollar/yen rate may fall on disappointment, traders said.
Still, wariness about Japanese intervention could keep the the greenback afloat especially during Asian trading hours.
In the past few sessions, the currency has been supported around 83.15 yen, as some market players expect Japanese authorities to intervene around that level.
Japan sold the yen for first time in six years in the market on Sept. 15 when the dollar hit a 15-year low of 82.87 yen.
The euro fell 0.3 percent to around $1.3640, extending losses after it hit a 6 1/2-month high of $1.3809 on Monday, as market players took profits from its rally since early September.
The euro had rallied against a broadly weakening dollar on expectations that the U.S. Federal Reserve will wade into its second round of quantitative easing.
The euro's fall put a temporary halt to the dollar's decline, with the dollar index rising 0.3 percent to 78.66, a touch above its eight-month low of 78.029. (Additional reporting by Charlotte Cooper and Masayuki Kitano; Editing by Joseph Radford)