SYDNEY The yen eased in early Asian trade on Wednesday, succumbing to renewed pressure after gold prices steadied somewhat from an eye-watering plunge earlier in the week.
The dollar bought 97.64 yen, up 0.1 percent from late U.S. trade, having bounced off from a near two-week low of 95.67. It was still down more than 2 percent from a four-year high near 100 yen set last week.
The euro was at 128.72 yen, coming off a 1-1/2 week trough of 125.00. It too was some way off a three-year peak of 131.10 set last week.
A historic plunge in gold prices on Monday, coupled with fresh concerns about China's economic growth saw investors plough back into the yen, reversing a tide of selling sparked by the Bank of Japan's aggressive stimulus program.
"We still believe that the recent volatility in the commodity prices was mainly driven by long position liquidation, while the underlying backdrop remains risk-positive due to expanding global monetary easing," said Vassili Serebriakov, strategist at BNP Paribas.
"Overall we expect the focus to gradually shift back to JPY which remains the key driver of FX markets. We see renewed USD/JPY gains driven by Japanese investor outflows, targeting USD/JPY at 105 by year-end."
Indeed, analysts expect Japanese investors will eventually look overseas for higher returns as the Bank of Japan injects about $1.4 trillion into the economy in two years as part of a dramatic plan to jumpstart growth.
Economic growth was also on the minds of a handful of Federal Reserve policy doves, who showed no signs they were prepared to dial down the U.S. central bank's stimulus any time soon.
Bolstering the case for the Fed to maintain its monetary stimulus, data on Tuesday showed a fall in consumer prices and weaker factory output.
The dollar lost ground against the euro, which gained momentum after clearing stiff resistance around $1.3110/20. The common currency was last at $1.3179.
Euro bulls largely shrugged off a report showing a sharp fall in German analyst and investor sentiment in April.
That saw the dollar index fall to 81.820 .DXY, but solid support is seen around 81.786, the 55-day moving average. Below that there is support at 81.744, a level representing the 38.2 percent retracement of its early February-early April rally.
The dollar was also on the backfoot against commodity currencies, helping them recover from Monday's sharp slide sparked in part by the dramatic drop in gold.
The Aussie was at $1.0388, pulling further away from a one-month low of $1.0291 plumbed on Monday.
There is little in the way of market-moving economic news scheduled for release in Asia on Wednesday.
The market will be focused on the Group of 20 meeting beginning on Thursday in Washington, where finance minister and central bankers from the world's leading economies will discuss the economic and financial market outlook, including the Cyprus crisis and asset price reactions.
(Editing by Edwina Gibbs)