* Demand for yen strong as China jitters prevail
* BOC, RBNZ and ECB policy reviews loom
* Euro lags as investors adjust positions for dovish ECB
(Updates prices, adds details and quotes)
By Anirban Nag
LONDON, March 9 (Reuters) - A moderately risk-averse tone
dominated currency markets on Wednesday, with the safe-haven yen
broadly higher amid anxiety about a slowdown in China.
The low-yielding euro, which tends to do well during times
of financial market uncertainty, however, underperformed and was
weaker before a European Central Bank meeting on Thursday. The
ECB is expected to take rates deeper into negative territory and
announce more asset purchases in a bid to boost inflation.
The dollar was 0.2 percent lower against the yen at 112.44
yen JPY= , having slid 0.7 percent on Tuesday. The euro, too,
was 0.5 percent lower at 123.55 yen EURJPY= and 0.3 percent
lower against the dollar at $1.0975.
The yen has been a winner so far this week after China's
exports tumbled by the most in more than six years last month.
The soft China data highlighted risks facing the global economy,
bolstering expectations for dovish outcomes at central bank
policy reviews in Europe, Canada and New Zealand.
"The poor Chinese data is fuelling risk aversion, but that
is slowly giving way to some positioning adjustment before the
ECB meeting," said Niels Christensen, FX strategist at Nordea.
"Given expectations are so high that the ECB will ease
policy, there is a chance that it could fall short and we could
see a bounce in the euro."
Those positioning for more losses in the euro are wary about
placing significant bets against it, after being burned in
December when the ECB eased policy less than expected. The euro
rose 4 percent against the dollar on Dec. 3 when the ECB action
fell short of market expectations.
This time, many investors are betting the ECB will lower the
deposit rate by 10 basis points to -0.40 percent, extend asset
purchases and possibly introduce tiered interest rates, like the
Bank of Japan. ID:nL3N15Q1VT ID:nL5N16G2VC
"The focal point is how long the market will attempt to
price in the risk of the ECB meeting ending in disappointment.
The euro could rise towards the $1.11 handle if attempts to
pre-empt such risk continue," said Masafumi Yamamoto, chief FX
strategist at Mizuho Securities in Tokyo.
Also on the defensive, the New Zealand dollar traded at
$0.6744 NZD=D4 , retreating from Friday's peak of $0.6820.
While markets imply a small chance of a rate cut by the Reserve
Bank of New Zealand on Thursday, investors suspect it is only a
matter of time before it delivers another cut to the 2.5 percent
cash rate.
In contrast, the Bank of Canada is expected to keep rates on
hold on Wednesday. But a retreat in oil prices took a toll on
the Canadian dollar, which eased to C$1.3416 per USD CAD=D4 ,
from a 3-1/2 month peak of C$1.3262 set on Monday.