TOKYO: The dollar came off a two-week high against the yen on Friday, weighed down by the euro's gains on political progress in Spain, but was seen likely to recoup losses and firm further on views the Federal Reserve will not signal strong economic stimulus. The greenback was also under pressure from the Australian dollar after it gained on the Australian central bank chief's upbeat remarks about the country's economy, soothing worries over deep interest rate cuts. Markets started the week thinking Bernanke may announce a third round of asset purchases or some other extraordinary policy later on Friday in a speech in Jackson Hole, Wyoming, pressuring the dollar, but this view has changed, giving the US currency a broad boost on Thursday. "The market is still yen long and as the yen failed to get stronger (vs the dollar) we may see further unwinding of those positions ahead of Bernanke, boosted by lingering fears of intervention," said Koji Fukaya, director of global foreign exchange research at Credit Suisse Securities in Tokyo. The dollar traded down 0.2 per cent at 77.28 yen , coming off a two-week high hit overnight of 77.70 yen. It hit a record low of 75.941 yen a week ago, giving rise to jitters that Tokyo would intervene in currency markets for the second time in less than a month. Tokyo traders say Japanese exporters may refrain from selling the dollar in their end-of-month transactions ahead of Bernanke's speech, hoping he does not announce QE3, which could spur further unwinding of dollar shorts, sending the dollar higher. "Exporters sold quite a lot (of dollars) yesterday around 77.50 and now stronger offers are lined up around 78.30," said a trader for a major Japanese bank, adding that stop loss orders by speculators are seen around 76.80 yen. Individual Japanese players were also spotted liquidating some yen-long positions ahead of the Jackson Hole speech, due to start at 1400 GMT. Charts also indicate the pair is poised for a rebound, having formed a round-bottom pattern. Strong support from the daily tenkan line is seen at 76.82 yen, with resistance posed by the kijun line at 78.10 yen. The market still believes the Fed is likely to suggest some easing measures, with some analysts staying bearish on the dollar. Despite the Fed's apparent failure to achieve an increase in hiring or spark a housing market recovery through its previous money-printing policies, some strategists believe it is nonetheless likely to take action to diminish risk aversion and boost investor sentiment.

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