(Corrects date in dateline)
* Dollar softer against most currencies except the yen
* Fed & BOJ policy decisions in focus
* Australia CPI could provide a brief distraction for AUD
By Ian Chua
SYDNEY, April 27 (Reuters) - The dollar and yen were on the defensive early on Wednesday, having suffered a broad retreat overnight as investors hunker down ahead of policy decisions by both the Federal Reserve and Bank of Japan.
Dollar bulls seem to suspect the Fed will sound dovish again, even though a rise in U.S. Treasury yields to five-week highs suggested other investors were primed for a more hawkish tone. The BOJ, on the other hand, could ease further.
That saw the euro outperform. It was back flirting with $1.1300 EUR= , pulling further away from a trough of $1.1216 set earlier in the week.
Against the yen, the common currency scaled a three-week peak just shy of 126.00 EURJPY=R . The greenback held above 111.00 JPY= after reversing from 110.67.
Both the dollar and yen were clear losers against commodity currencies and sterling, which climbed to a near three-month high of $1.4640 GBP=D4 .
The Canadian dollar reached a fresh 2016 peak of 88.43 yen CADJPY=R and was close to a nine-month high on the greenback CAD=D4 .
The Fed is considered certain to keep rates steady later on Wednesday, so the focus rests squarely on the tone of its statement. Traders said policymakers may be wary of sending too strong a message of an imminent policy tightening, particularly after another batch of disappointing data. while the FOMC will leave its policy options wide open and stress data dependent, there is likely to be little in the way of catalysts for a repricing for a June rate hike," analysts at BNP Paribas (PA:BNPP) wrote in a note to clients.
Such an outcome would leave the dollar vulnerable to more weakness against the euro and yen, they added.
The dollar index .DXY fell as far as 94.205, recoiling from a recent high of 95.196. It last stood at 94.508.
Hours after the Fed, the BOJ will step up to the plate.
The decision to ease or not is seen as a close call. Any fresh stimulus would likely focus on boosting purchases of stock trust funds, though BOJ officials have said they can combine other steps like more government bond buying or even another cut in interest rates. Australia, consumer inflation data due at 0130 GMT could provide a bit of distraction for Aussie players ahead of the major central bank events. ECONAU
The Aussie firmed slightly overnight to $0.7750 AUD=D4 and was near a 10-month high of $0.7836 set a week ago, so a surprisingly weak number could undermine the currency.