* Yen edges up, but still struggling to regain traction
* Aussie rises briefly after RBA statement
* Aussie later retreats on profit-taking
* Drop in oil prices keeps risk appetite in check (Updates prices, adds comments)
By Masayuki Kitano and Ian Chua
SINGAPORE/SYDNEY, Feb 2 (Reuters) - The yen edged higher on Tuesday as a fall in oil prices weighed on equities and risk appetite, while the Australian dollar slipped after the country's central bank held rates steady but left the door open to further easing.
The dollar fell 0.5 percent to 120.44 yen JPY= , backing away from a one-month high of 121.70 yen set on Friday in the wake of the Bank of Japan's surprise adoption of negative interest rates.
"Overall we're seeing a little bit of risk-off...in the market and I think that's what's driving money into the yen," said Stephen Innes, senior trader for FX broker OANDA in Singapore.
"My feeling is the main driver right now continues to be the oil market," Innes said.
Oil prices fell as worries about top energy consumer China and rising oil supply weighed on markets. market participants said the dollar was likely to find support at levels near 120 yen in the near term.
A trader for a Japanese bank in Singapore said the BOJ's adoption of negative interest rates could make it more costly for speculators to hold on to long positions in the yen, which has been regarded as a safe haven currency.
That should help lend support to the greenback, he said.
"I think there is no doubt that it has become harder to try for the downside in the dollar against the yen," the trader said.
The euro rose 0.2 percent to $1.0908 EUR= . It was still within a $1.0711-$1.0985 range seen since the start of the year.
The Australian dollar gained a brief lift after the Reserve Bank of Australia (RBA) kept interest rates unchanged at 2 percent and posted a less-dovish-than-expected statement. Australian dollar, however, quickly ran into profit-taking and was last down 0.6 percent at $0.7070 AUD=D4 .
"They (RBA) seems a bit more confident about the Australian economy than they were earlier. We think that they will retain this confidence over the next few months," said Chidu Narayanan, an economist for Standard Chartered (L:STAN) Bank in Singapore.
"We do however think data should become weaker as we head into the middle of the year, and we think that the RBA will be forced to cut rates in the second half of the year."