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LONDON: The U.S. dollar slipped on Monday as a pick-up in market sentiment drove stocks and riskier currencies higher, while the yen gained on reports that Japan will consider revising a decade-old blueprint for fighting deflation.

The dollar index - which tracks the greenback against a basket of six major currencies - fell 0.2% to 104.580, reversing some of its gains from the previous week after the U.S. Federal Reserve and European Central Bank (ECB) hiked rates and promised more to come.

A rebound in risk sentiment across markets pushed European stocks higher after a bruising selloff last week, while currencies including the euro and sterling retraced some of their losses from the previous two sessions.

The euro gained 0.3% to $1.06095, while sterling strengthened 0.3% to $1.21760. However, both remained lower than their levels before last week’s central bank moves.

“Markets are trying to find their feet a bit,” said Kenneth Broux, currency strategist at Societe Generale. “I wouldn’t hang my hat on the price action this morning.”

The safe haven dollar has broadly gained this year, up 9%, on concerns about the global economy and widespread inflation. But it has slid nearly 7% in the fourth quarter as investors bet that peak inflation and economic recovery may be in sight.

The Japanese yen gained 0.2% on the day to 136.420 per dollar on reports Japan is considering revising a key monetary policy after a new Bank of Japan governor is appointed in April.

The government will consider revising a joint statement it signed in 2013 that commits the central bank to meeting a 2% inflation target as soon as possible, sources said.

“The upshot is this perhaps provides timely flexibility, but it doesn’t bind monetary policy bias one way or another,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank, adding more clarity was needed for a bigger impact on the yen.

A survey of business morale in Germany showed a bigger increase than expected in December, supporting broader market risk sentiment, as the outlook for Europe’s largest economy improved despite the energy crisis.

ECB vice-president Luis de Guindos said on Monday that the euro zone will continue to hike rates to curb inflation and is not considering revising its own mid-term inflation goal of 2%.

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