The dollar was capped against its peers on Wednesday on falling US yields and before the Federal Reserve's policy meeting minutes, though it managed to gain on the yen as stronger investor risk appetite curbed demand for the Japanese currency.

The US currency was up 0.2 per cent at 110.83 yen.

The Japanese currency, which tends to serve as a safe-haven in times of risk aversion, gave up ground as Tokyo shares climbed to fresh two-month highs.

“The yen is on the defensive with strong equities prompting a 'risk on' mood,” said Koji Fukaya, president of FPG Securities.

The dollar had already received a lift against the yen on Tuesday after Bank of Japan Governor Haruhiko Kuroda said the central bank was ready to ramp up stimulus, if sharp yen rises hurt the economy.

“The BOJ does not really have a lot of options left even if it wanted to act. But the global trend -- starting with the US, Europe and Australia -- is moving towards central bank dovishness and the BOJ's stance is in line with the trend.”

The dollar index versus a basket of six major currencies was a touch lower at 96.451, after shedding about 0.4 per cent overnight.

“The dollar is weighed with Treasury yields on a downturn. Attempts by participants to price in potentially dovish FOMC (Federal Open Market Committee) meeting minutes are also keeping the dollar on the defensive,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

The benchmark 10-year US Treasury yield fell sharply to an 11-day low on Tuesday ahead of the Fed meeting minutes, which are due later on Wednesday.

The minutes from the January Fed meeting will be closely watched following a dovish statement at that review.

The dollar has struggled against most of its rivals as, along with the yen, it has also served as a safe-haven.

The dollar index rose to a two-month high last week, but demand for the liquid greenback has recently ebbed on optimism that a fresh round of talks between China and the US would help resolve their trade conflict.

The euro nudged up 0.1 per cent to $1.1353 and stood near a two-week peak of $1.1358 brushed on Tuesday. The pound stretched its overnight rally and rose to a two-week high of $1.3077.

Sterling had surged more than 1 per cent on Tuesday on hopes that British Prime Minister Theresa May will make progress in seeking changes to her Brexit deal with the European Union.

The onshore Chinese yuan gained about 0.5 per cent to 6.7248 per dollar, its strongest since February 1.

The yuan advanced after Bloomberg reported that the US is pressing to secure a pledge from China that it will not devalue its yuan as a part of a trade deal.

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