By Masayuki Kitano TOKYO (Reuters) - The yen rose and higher-yielding currencies dipped on Tuesday as demand for riskier assets took a breather, while sterling faltered on weak data and after Moody's said Britain faces a dilemma over its support for the banking sector. The yen climbed broadly with short-term traders taking cues from a dip in Asian shares and U.S. stock index futures, and there was also some talk of euro-selling against the yen by Japanese corporates. "Japanese exporters are in the market and selling pretty actively, including the euro against the yen," said Yuji Matsuura, joint general manager at Aozora Bank's forex and derivatives trading group. There could be more yen-buying by Japanese exporters during the week, and there might also be some flows in the last week of March, just before they close their books at the end of Japan's fiscal year, Matsuura continued. Market players said, however, that gains in the yen have been limited by speculation that the Bank of Japan may take further steps to ease monetary policy. The euro fell 0.5 percent to 122.46 yen, off a two-week high of 123.90 yen struck on EBS on Monday. The euro also dropped against the dollar, dipping 0.1 percent to $1.3615. That was still well off an over nine-month low of $1.3433 struck last week. The euro's advances were capped after Greek Prime Minister George Papandreou warned on Monday that if the Greek crisis worsened it could lead to a new global financial meltdown.. The dollar fell 0.4 percent to 89.95 yen. The greenback had rallied on the yen to a two-week high of 90.69 yen on EBS on Monday, after a better-than-expected U.S. jobs report backed views that the U.S. Federal Reserve will lift rates faster than the Bank of Japan. The report had also bolstered demand for higher-yielding currencies and riskier assets like stocks and commodities, on improved economic prospects. The Australian dollar fell 0.5 percent against the yen and the New Zealand dollar shed 0.8 percent. Despite its rise on Tuesday, traders said the yen was still seen on the defensive after having recently broken past key support levels on a range of crosses. "Note the breakouts through key intraday levels including the 80.85 area for the Aussie/yen as well as the 121.90 zone for euro/yen and the 134.85 pivot for the pound/yen," JP Morgan said in a morning note. "These levels will maintain the near term upside bias." EYES ON BOJ MEETING The dollar is likely to be supported at levels around 89.50 yen on speculation about more monetary easing steps from the BOJ, possibly at its policy meeting next week, said a trader for a Japanese trust bank. The yen has weakened after the Nikkei newspaper reported on Friday that the BOJ was examining easing again and may decide on such a move when it meets on March 16-17. Sources familiar with the matter said the BOJ is likely to debate this month easing its ultra-loose monetary policy again. The most likely next step for the BOJ is to expand the fund-supply operation it put in place in December, under which it lends to banks at 0.1 percent, either by increasing the size from 10 trillion yen or extending the duration of loans from the current three months. Even if such steps are taken, the market impact could be limited given how low yen money market rates are already, said a trader for a European bank. "Basically, the aim may be to achieve an announcement effect and the market has factored in a lot of that," the trader said, adding that the dollar could fall against the yen if the BOJ stands pat and unveils no new measures. Sterling fell 0.4 percent to $1.5006 and shed 0.8 percent to 134.99 yen. Data showing that British house prices grew last month at their slowest pace since August weighed on sterling. Another negative factor for sterling was a Moody's Investors Service report saying Britain faces a difficult balancing act in deciding how and when to reduce support for the banking sector, given growth in the UK's public debt burden.
