* Fed's Yellen keeps door open for more policy action
By Anirban Nag
LONDON, April 12 (Reuters) - The euro and growth-linked currencies such as the Australian dollar strengthened on Thursday, earning some respite from concerns about the global economy but with gains hostage to the risk of a jump in borrowing costs at an Italian bond auction.
Italian three-year borrowing costs looked set to jump by a percentage point from a month ago at a bond auction, based on market analysis.
It would be the latest sign that investors' concerns about Spain are spreading. Analysts say a disappointing result could see euro come under fresh selling pressure and it may ease towards $1.30 against the dollar.
The euro was up 0.1 percent at $1.3120, off a one-week high of $1.3158 struck on Wednesday, and well within the $1.3030-$1.3165 range trodden in the past week. The currency rose 0.4 percent to 106.46 yen, well above Wednesday's trough of 105.45.
"Should the Italian auction disappoint, we could see the euro reverse some of its gains," said Ankita Dudani, G-10 currency strategist at RBS Global Banking, who expects the bond sale to go through without much of a hitch.
She added that even if demand for riskier assets recovered, a bad result at the auction could see euro the underperform especially against the growth-linked currencies. The results are due after 0900 GMT.
The Australian dollar was up nearly 1 percent against the U.S. dollar at $1.0391 after unexpectedly strong local employment figures eased worries the Australian economy could suffer from slower global growth.
Australian employment surged past all expectations in March while the jobless rate stayed at a low 5.2 percent.
Mounting expectations of an interest rate cut next month and concerns about a hard economic landing in China, Australia's single biggest export market, have combined to drag the Aussie 3.7 percent below this year's peak of $1.0857 hit in February.
YEN OFF HIGHS
The uncertainty over whether Chinese policymakers can engineer a soft landing still lingers while concerns about rising yields on euro zone peripheral debt could intensify.
ECB Executive Board member Benoit Coeure sought to soothe some of that nervousness about the euro zone when he said on Wednesday that the ECB still has its bond-buying programme as an option.
That led to some improvement in sentiment towards riskier assets and currencies, driving the safe-haven Japanese yen lower.
The dollar was up 0.2 percent against the yen at 81.04 , up from a six-week low at 80.57 yen struck earlier in the week.
"Some players have bought the yen back on resurfacing euro worries, but this is likely to be nothing more than a correction to the broader weak yen trend," said Teppei Ino, a currency strategist at Bank of Tokyo-Mitsubishi UFJ in Tokyo.
"While against the euro, the yen may still have some more space to strengthen, the stop in the fall in 10-year Treasury yields around two percent could serve as a signal to slowly buy the dollar back," he said.
The dollar index was flat at 79.738, not far from a one-week low of 79.508. The greenback has been under pressure in recent session as expectations of another round of quantitative easing has gained ground after disappointing U.S. jobs data.
The Federal Reserve's influential vice chair Janet Yellen said the ultra-easy monetary policy was appropriate given high unemployment and the headwinds facing the economy and left the door open to further action if needed.
