* Dollar/yen hits 8-1/2-month low, then rebounds
* Dollar rises broadly after sell-off in prior day
* U.S. earnings season, BOE, ECB rate meetings loom (Adds comment, updates prices, changes byline, changes dateline, previous LONDON)
By Wanfeng Zhou
NEW YORK, Oct 7 (Reuters) - The U.S. dollar rose on Wednesday, rebounding from a low of more than 8-months against the yen as optimism stoked by Australia's interest-rate hike in the prior session dissipated, boosting safe-haven demand for the greenback.
The dollar earlier hit a low near 88 yen after Japanese Finance Minister Hirohisa Fujii said on Wednesday he was quietly watching currency moves, although he added authorities may take steps if moves become abnormal. Much of the yen's rise against the dollar, he said, was being driven by the market's perception that U.S. interest rates will remain low.
The dollar came under heavy pressure on Tuesday after a rate hike in Australia bolstered expectations the global economy was recovering and fueled a rally in stocks worldwide.
"There was a knee-jerk reaction yesterday after the surprise RBA rate hike in Australia," Samarjit Shankar, managing director of global FX strategy at BNY Mellon in Boston.
"We're now seeing a bit of a pullback in the move and the dollar is recovering a little bit. (The market) is coming back to the realization that was just one central bank, and it's not necessarily so that other central banks would follow right away," he added.
The yen's inability to appreciate beyond 88.00 yen, where margin calls and options barriers lurked, prompted a recovery in the U.S. currency, traders said. A sustained fall under that level was seen opening the door to a slide to 87.10 yen, a level hit in January for the first time since mid-1995.
In early New York trading, the dollar rose 0.5 percent to 89.23 yen. It earlier fell as low as 88.01 yen, according to electronic trading platform EBS, its lowest level since late January.
"I suspect the market wants to see how far it can push the new Japanese administration, who have been sending mixed messages on its attitude toward yen strength," said Daragh Maher, deputy head of forex strategy at Calyon.
The euro fell 0.3 percent to $1.4676.
The ICE Futures U.S. dollar index, which tracks the greenback versus a basket of six major currencies, was up 0.24 percent at 76.524, holding above a 13-month low of 75.827 hit last month.
Market players were looking to U.S. earnings results later in the day, especially at aluminum producer Alcoa Inc, for evidence of the strength of corporate recovery.
On Thursday, the European Central Bank and the Bank of England will end their monthly policy meetings. Both are expected to hold rates steady, and focus will be on whether they offer any hints into the outlook for quantitative easing.
In other trading, the Australian dollar rose to $0.8951, its highest since early August 2008, before pulling back to trade 0.2 percent lower at US$0.8887.