By Masayuki Kitano and Hideyuki Sano
SINGAPORE/TOKYO, May 12 (Reuters) - The dollar edged higher against the yen on Thursday with traders citing position-squaring by short-term players, although doubts over global growth prospects continued to cloud the greenback's outlook.
The dollar edged up 0.4 percent to 108.84 yen. The dollar had fallen 0.8 percent on Wednesday, having lost steam after touching a two-week high of 109.38 yen.
Some traders who sold the dollar in its recent bounce seem to be buying back dollars now, said a trader for a Japanese bank in Singapore.
The dollar had set an 18-month low of 105.55 yen on May 3, having slid after the Bank of Japan held off from expanding its monetary stimulus at its policy meeting in late April.
The greenback has since regained some footing as traders cut their bullish bets on the yen following a series of warnings from Japanese Finance Minister Taro Aso that the government would intervene to curb any one-sided gains.
But analysts believe Japan will be wary of intervening before it hosts a Group of 7 meeting this month, even though Tokyo is clearly unhappy with a nearly 11 percent rise in the yen since December.
On Thursday, BOJ Governor Haruhiko Kuroda said it would be difficult for Japan's finance ministry to intentionally weaken the yen to boost exports, while adding that big swings and rapid changes in currency markets that do not reflect economic fundamentals are undesirable.
Takatoshi Ito, a prominent academic with close ties to BOJ Governor Haruhiko Kuroda, said that whether Japan conducts yen-selling intervention would depend on whether it can convince Group of Seven countries, particularly the United States, that recent yen rises were excessive.
Traders say the dollar faces chart resistance at levels above 109 yen. The area around 109.30-40 yen now looks like a strong resistance level for the dollar, said Koichi Yoshikawa, executive director of finance at Standard Chartered Bank.
Against a basket of six major currencies, the dollar edged up 0.1 percent to 93.904, but remained below Tuesday's high at 94.356, which represented a 2.7 percent recovery from its 16-month trough hit earlier in the month.
While the dollar has been supported by a recovery in risk appetite in financial markets, doubts linger over the strength of the global economy with political risks in many places seen as hampering companies' investment plans.
"It is not clear how strong the U.S. economy will be in the April-June quarter. It will be better than the first quarter but it doesn't look so strong," said Makoto Noji, senior strategist at SMBC Nikko Securities.
U.S. economic growth slowed to 0.5 percent in the first quarter, with the strength of the dollar late last year seen as a factor weighing on the economy. That has also supported expectations that the Fed may delay rate increases this year, further hampering dollar bulls.
The euro held steady at $1.1422, having pulled up from Tuesday's low of $1.13585.
Sterling remains on the defensive as the latest surveys show the "Brexit" referendum on Britain's continued membership in the European Union on June 23 is still too close to call.
The Bank of England's monetary policy committee releases updated growth and inflation forecasts in a quarterly report on Thursday but uncertainty over Brexit is likely to keep the central bank extra cautious.
The pound stood at $1.4445, not far from its two-week low of $1.4375 touched on Monday. (Reporting by Masayuki Kitano; Editing by Shri Navaratnam and Eric Meijer)
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