TOKYO: The Australian dollar hovered close to its highest level of the year on Tuesday, with the central bank set to hold policy steady later and traders focussed on any hints of potential near-term easing.

The yen idled in the middle of its range against the U.S. dollar this month ahead of a speech by Bank of Japan Governor Kazuo Ueda that could provide more clues about the pace of interest rate hikes, after the central bank left policy unchanged last week and signalled no rush to tighten further.

The euro attempted to find its feet following a nearly 0.5% tumble overnight as weak business activity surveys pointed to additional rate cuts, while sterling tracked close to a 2-1/2-year peak with the Bank of England last week striking a much less dovish posture than the Federal Reserve or European Central Bank.

The Aussie edged down 0.1% to $0.68305 as of 0007 GMT, after it jumped 0.45% in the previous session and touched $0.6853 for the first time since Dec. 28.

The RBA is widely expected to keep rates steady on Tuesday, but economists and traders have taken opposing views of the potential for lower rates later this year. Of 44 economists polled by Reuters, only four predict a reduction by end-December, whereas traders put the odds at roughly 60% for a cut.

Analysts at Commonwealth Bank of Australia wrote in a client note that they "expect the RBA's comments to be hawkish - albeit marginally less hawkish than in August - helping guide AUD higher," with a test of $0.69 likely this week, a level last seen in February of last year.

The Aussie would also benefit from any stimulus announcement from China, they said, with People's Bank of China Governor Pan Gongsheng due to hold a news conference later on Tuesday on the topic of financial support measures.

The yen edged up to 143.45 per dollar, but remained close to the centre of its September range of 147.20 to 139.58, a more than one-year peak reached on Sept. 16.

The yen has retreated amid waning bets for aggressive tightening by the BOJ, particularly after governor Ueda struck a cautious tone of Friday, saying the central bank would spend some time monitoring global growth risks.

The euro was little changed at $1.1107. A survey compiled by S&P Global showed euro zone business activity sharply contracted this month as the bloc's dominant services industry flat-lined, while a downturn in manufacturing accelerated.

Sterling was flat at $1.33495. The BoE kept rates unchanged last Thursday, with its governor saying the central bank had to be "careful not to cut too fast or by too much".

(Reporting by Kevin Buckland Editing by Shri Navaratnam)