Yen pauses from rally

The yen steadied against the dollar and fell versus the euro on Tuesday in a pause from the previous session's rally on expectations for a near-term end to the Bank of Japan's ultra-easy monetary policy.
The dollar took on a weaker tone ahead of US growth and consumption data later in the day, while the euro was supported by upbeat business climate data that firmed predictions for a European Central Bank interest rate rise on Thursday.
The yen slipped as Japanese importers moved into dollars, and as Japanese institutional investors bought the dollar and euro on dips.
But investors were reluctant to short the yen aggressively with growing speculation that the BOJ will end its policy of flooding the banking system with cash by the end of April, and possibly as soon as a meeting late next week.
"Right now it's all about the speculation that Japan will end its quantitative easing," Barclays Capital foreign exchange strategist Adarsh Sinha said.
By 1250 GMT, the dollar was at 116.31 yen, slightly up from late US trade on Monday, when it fell 0.6 percent.
Expectations for a near-term end to the BoJ's easy monetary policy drove the Japanese currency to a one-month high of 115.64 per dollar on Monday.
But investors grew cautious on Tuesday after Japanese finance minister Sadakazu Tanigaki said Japan was still in mild deflation.
Barclays' Sinha said that a shift in policy did not herald a swift move to raise interest rates. "Once we do get the end of quantitative easing, it will be some time before we get an end to zero interest rates," he said.
The market shrugged off Japanese data that showed industrial output rose 0.3 percent in January from December - below forecasts but up for a sixth straight month, the longest stretch of monthly growth since 1998.
The reading underscored the view that Japan's economic recovery was on track, supporting expectations the central bank will ditch its easing policy, and raise interest rates from near zero later this year for the first time since August 2000.
Later in the session, the second reading of US fourth-quarter gross domestic product data will attract more attention than usual, given the unexpected low growth rate reported in the first estimate.
The euro climbed to 138.18 yen, up nearly 0.4 percent on the day.
The single currency also gained 0.28 percent to $1.1879, supported by a rise in the European Commission's business climate indicator for the eurozone to 0.61 in February from 0.34 in January.