(Corrects dollar index milestone to 5-month low from 5-week low in 3rd paragraph)
* Yen stands near 17-month high vs dollar
* Market focus on how Japanese authorities respond to bullish yen
* Sterling near 1-mth high vs dollar on lift from BOE announcement
* Continuing crude bounce push loonie, Aussie to fresh highs
TOKYO, March 18 (Reuters) - The yen stood within reach of a 17-month high against the dollar early on Friday, with the Federal Reserve's cautious stance towards hiking interest rates continuing to take a toll on the U.S. currency.
The dollar traded little changed at 111.28 yen JPY= after sliding to 110.67 overnight, its lowest since October 2014. The greenback was dragged lower as Treasury yields slid after the Fed lowered its expectations for interest rate increases this year.
The euro hovered near a five-week high of $1.1342 EUR= . The dollar index .DXY moved in the opposite direction and stood near a five-month trough of 94.650 plumbed overnight.
The market's focus was on how far the yen could rise before it elicited some kind of response from Japanese authorities, who generally do not welcome a too-strong currency because of the impact on the nations exports.
"It is easier for speculators to bet on further dollar weakness as the European and Japanese central banks have just concluded their policy meetings, meaning further easing will not take place for a while," said Masafumi Yamamoto, chief FX strategist at Mizuho Securities in Tokyo.
The European Central Bank eased extensively last week, while the Bank of Japan stood pat at its policy meeting earlier on Tuesday.
"The Japanese authorities have not been clear in their stance towards a strong yen. The market could attempt to test the authorities to see where exactly they stand on the yen," Yamamoto said.
Elsewhere, sterling received a further boost against the broadly weaker dollar after the Bank of England on Thursday kept interest rates steady as expected and said rates were more likely to rise than not.
The pound traded just below a one-month high of $1.4504 GBP=D4 scaled overnight. It has clawed back from a seven-year low of $1.3836 hit late in February on concerns over the potential exit of Britain from the European Union.
A continuing bounce in crude oil prices boded well for commodity-linked currencies. The Australian dollar rose to an eight-month peak of $0.7660 AUD=D4 early on Friday, while the Canadian dollar advanced to a five-month high of C$1.2946 CAD=D4 versus the dollar overnight.
(Editing by Shri Navaratnam)