* Aussie hits 2-week high after RBA stands pat on policy
* Dollar hovers near 1-week high vs yen, risk appetite supports
* Some see conclusion of TPP talks weighing on yen (Updates throughout)
By Shinichi Saoshiro
TOKYO, Oct 6 (Reuters) - The dollar stood tall versus the yen on Tuesday as improving investor risk appetite worked against the safe-haven Japanese currency, which was also under pressure from the prospect of the Bank of Japan eventually easing monetary policy.
Better risk appetite in turn helped the Australian dollar to a 2-week high, with the Aussie further boosted when the Reserve Bank of Australia held rates steady for a fifth month.
The Australian dollar AUD=D4 was up 0.4 percent at $0.7114 after touching a 2-week peak of $0.7120.
Australia's central bank kept its cash rate unchanged at a record low 2.0 percent on Tuesday for a fifth straight month in a widely expected decision as it waited to judge the impact of past easings.
"It is difficult to see why the Aussie responded to the RBA decision. There were expectations in some quarters that the RBA would touch upon a further cut, which was not really the case," said Masashi Murata, a senior strategist at Brown Brothers Harriman in Tokyo.
"The Aussie's rise does not look sustainable. The statements were by no means hawkish and the RBA clearly stated that monetary policy needed to be accommodative," he said.
Buoyed by the Aussie's rise, the New Zealand dollar advanced 0.2 percent to $0.6503 NZD=D4 and edged back to a 6-week high of $0.6532 struck on Monday.
Elsewhere, the dollar fetched 120.44 yen JPY= after gaining 0.5 percent overnight to touch a 1-week high of 120.55.
Investor risk appetite improved after last Friday's weak U.S. nonfarm payrolls report was seen cutting the chances of the Federal Reserve hiking interest rates this year.
Even as the Fed could be forced to hold off tightening this year, the policy divergence theme that has supported the greenback remained in place.
Following a two-day meeting the BOJ makes a policy decision on Wednesday and the market will be watching for any hints of further easing.
Inflation has undershot central bank forecasts in Japan and there has been speculation that the BOJ could downgrade its growth and economic forecasts this week, leaving the door open for more monetary easing later in October.
Analysts also saw the yen coming under longer-term pressure against the dollar after 12 Pacific Rim countries, including the United States and Japan, finally reached the Trans-Pacific Partnership (TPP) pact on Monday.
Seen as the most ambitious trade pact in a generation, TPP aims to liberalize commerce in 40 percent of the world's economy. ID:nL3N1252R6
While TPP negotiations were still underway, the dollar's approach to 125 yen was seen as politically undesirable as such gains were seen stimulating those on both sides of the Pacific opposed to the talks.
Osamu Takashima, head of FX strategy at Citigroup (NYSE:C) Securities in Tokyo, reckoned that scrutiny of the stronger dollar should ease now that the negotiations are over.
Takashima also suggested that Prime Minister Shinzo Abe's government could try to drum up popularity, which sagged when Abe recently pushed through controversial national security laws, by compiling economic packages while mustering the BOJ's help as well.
"We believe both are essentially negative for the Japanese currency," he wrote.
The euro was nearly flat at $1.1184 EUR= after dipping 0.2 percent on Monday.