(Updates at 0940 GMT)
The yen rose on Wednesday as Japanese bond yields climbed sharply on hopes that ultra-loose monetary policy will soon end, while the dollar fell as the euro and pound advanced.
The dollar was last down 0.66% against the yen JPY=EBS at 147.39. The yen tracked Japanese government bond yields JP10YTN=JBTC , which leapt to six-week highs after Bank of Japan chief Kazuo Ueda said on Tuesday that the prospects of achieving the central bank's inflation target were gradually increasing.
Strong Japanese export data on Wednesday added to the positive mood around the yen, as did a dip in U.S. bond yields as investors tried to gauge the likely path of Federal Reserve interest rates.
"Ueda's comments have given the market a little more confidence that April is definitely a live date for a potential exit from the current policy," said Ray Attrill, head of FX research at National Australia Bank.
The euro EUR=EBS was last up 0.4% at $1.0896 after falling 0.27% on Tuesday.
It rose slightly after purchasing managers' index surveys showed that the euro zone economy's downturn eased somewhat in January although it remained sluggish. The euro slipped to its lowest against the pound EURGBP=D3 since early September at 85.4 pence.
The dollar index =USD was down 0.42% at 103.08, reversing the previous two days' 0.26% increase.
It touched its highest since Dec. 13 at 103.82 on Tuesday and is up just under 2% this year as stronger-than-expected data and push-back from central bankers has caused the market to rein in its expectations for rapid rate cuts this year.
Investors' focus was on the European Central Bank's latest interest rate decision on Thursday, where President Christine Lagarde could give hints about when euro zone interest rates might start falling, said Alvin Tan, head of Asia FX strategy at RBC Capital Markets.
"The dollar index currently is literally almost unchanged since last Wednesday," he added. "In many ways it's following U.S. rates (bond yields) which have also been chopping around... FX and rates markets are waiting for the next catalyst."
Sterling GBP=D3 was last 0.55% higher at $1.2755. It received a boost from survey data which showed that British services firms saw another pick-up in growth in January.
China's central bank said on Wednesday it will cut the amount of cash banks must hold as reserves by 50 basis points from Feb. 5, in an attempt to boost lending and the economy.
The onshore yuan strengthened after the announcement CNY=CFXS , touching an almost two-week high of 7.1601 to the dollar.
Tan said the yuan could also be receiving a boost from a report that China is mulling a large stimulus package to boost its financial markets, which would likely involve offshore funds selling dollars in favour of yuan.
The U.S. rate futures market on Tuesday priced in a roughly 52% chance of a March rate cut, up from late on Monday, but down from as much 80% about two weeks ago, according to LSEG's rate probability app.
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