The yen rebounded modestly against its peers on Wednesday after the Bank of Japan stood pat on monetary policy.

The yen was pressured earlier amid some speculation that the BOJ would ease in the wake of weak economic data and flagging inflation, but the central bank kept monetary policy steady, preferring to save its limited options.

The focus is now on Governor Haruhiko Kuroda’s news conference at 0630 GMT and the market will sift through his comments for any hints of future easing.

The dollar was down 0.2 per cent at 120.03 yen, pulling back from the day’s high of 120.36.

The euro dipped 0.2 per cent to 135.27 yen after gaining about 0.6 per cent overnight. The yen also pulled away from a 2-1/2-week low of 86.26 to the Australian dollar touched before the BOJ’s decision.

“The slip by dollar/yen is limited as speculation that the BOJ would ease today was not strong to begin with. It appears some speculative players simply shorted the dollar as planned in case the BOJ held steady,’’ said Masafumi Yamamoto, senior strategist at Monex in Tokyo.

“There is still speculation that the BOJ will ease on October 30, and that is limiting the dollar’s downside,’’ he said, referring to the BOJ board's next policy review.

“I still expect the BOJ will ease policy further later this month when it is likely to cut its economic projections,’’ said Yasunari Ueno, chief market economist at Mizuho Securities in Tokyo.

“There was no reason to act today given relatively firm readings in the latest tankan and stability in financial markets. Further easing today would be ill-timed just as the premier reshuffles his cabinet.’’

Elsewhere, the Australian dollar retained its bullish momentum from the previous day and touched a 3-week high of $0.7179.

Aussie bears beat a hasty retreat after the Reserve Bank of Australia had on Tuesday disappointed by offering a neutral statement despite growing market worries about a hard landing in China, Australia’s biggest export market.

There is also increasing doubt the Federal Reserve can afford to hike interest rates this year with US jobs growth slowing. That has weighed on the dollar and lifted risk sentiment to the benefit of currencies like the Aussie.

The euro firmed to $1.1277 after gaining 0.7 per cent against the still floundering greenback. The dollar index was knocked back down to 95.369, near the post-US payrolls trough of 95.218 struck on Friday.

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