* Yen steady vs dollar, investors wary of more yen selling
* Euro at 1-month high vs dollar, yen after Spain auction
* Swiss franc weakens broadly after SNB meeting (Refiles to remove extraneous word in first paragraph)
By Wanfeng Zhou
NEW YORK, Sept 16 (Reuters) - The yen was little changed against the U.S. dollar on Thursday with the Bank of Japan staying out of currency markets after their massive yen-selling operation the previous day, but wariness about fresh selling capped gains.
The euro rose to its highest in more than a month though against the dollar and the yen after strong demand at a Spanish bond auction reinforced confidence in Europe.
The Swiss franc weakened broadly after the Swiss National Bank kept interest rates unchanged as expected and said that it expected a slowdown in economic growth due to strength in the currency. [ID:nWEA8411]
Japan sold an estimated 1.8 trillion yen ($21.14 billion) for dollars on Wednesday, a record for a single day, in a bid to help its exporters and increase its money supply to counter deflation. Japan's first currency intervention in six years knocked the yen from a 15-year high versus the dollar, but the yen's six month uptrend did not look to be convincingly broken.
"Things have been quiet on the intervention front so far today. Clients are hesitant at this point to touch dollar/yen in either direction," said Amelia Bourdeau, senior currency strategist at UBS AG in Stamford, Connecticut.
"Investors need more information. They have to watch dollar/yen for another week or two just to see the frequency with which they come in to the market and the size (of intervention)."
Prime Minister Naoto Kan reiterated on Thursday Japan would take decisive steps on yen strength, Jiji news agency reported, while Bank of Japan Governor Masaaki Shirakawa said he expected intervention would stabilize the forex market. [ID:nTKF107009]
"It's too early to take on Japanese authorities. They have unlimited fire power and the dollar is under quite a lot of stress at the moment," said David Bloom, head of global currency strategy at HSBC. "I'd expect the dollar/yen to move higher at least in the short term."
In early New York trading, the dollar
In the near term, the dollar could climb to 86 yen as speculators spooked by Wednesday's action cut their long yen positions, analysts said. The dollar's upside may be capped around 85.83 yen, where a trendline from the dollar's highs in May and June falls, and 85.95 yen, the 55-day moving average.
Others in the market said the yen's claw back, while
slight, reflected the difficulty of stopping yen appreciation,
given narrow yield spreads between Japanese and U.S. government
bonds.
For dollar/yen correlations http://link.reuters.com/wyn43p
For graphic on intervention http://link.reuters.com/wym42p
For Insider on yen http://link.reuters.com/rak63p
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Market participants said dollar selling by some Japanese exporters pushed the U.S. currency off Wednesday's high of 85.78 yen hit on electronic trading platform EBS. Traders have said exporters want to sell the dollar above 85 yen before their half-year book-closings at the end of September.
Investors awaited comments from U.S. Treasury Secretary Timothy Geithner later in the day for any hints of Washington's reaction to the yen selling as the market waits to see how the intervention is received by Group of Seven countries.
SPANISH BOND SALE
The euro
"The Spanish bond auction went very well and that's removed some of the debt risks attached to the euro," said Chris Turner, head of fx strategy at ING.
Traders in London said the euro's initial rise after the results took out stop-loss orders placed around $1.3047, the 61.8 percent retracement of its sell-off in August.
It rose as high as 112.32 yen
The Swiss franc tumbled, with the euro jumping 1.9 percent
to 1.3291 francs