Investing.com - The dollar rose against the yen on Wednesday amid improving risk appetite as concerns over trade friction between the U.S. and China and tensions in the Middle East subsided.

USD/JPY was up 0.3% to 107.33 by 03:21 AM ET (07:21 AM GMT), pulling away from Tuesday’s lows of 106.87.

Stronger market sentiment dampened demand for the safe haven Japanese currency, which is often sought in times of market turmoil and political tensions.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, was up 0.17% to 89.36 after touching a three week low of 88.95 on Tuesday.

The dollar was supported by solid U.S. economic reports as market focus turned back to economic fundamentals as fears over tensions in Syria and a simmering U.S.-China trade spat receded.

Reports on Tuesday showed that U.S. housing starts rose more strongly than expected in March while industrial production was steady.

The euro was a touch lower against the dollar, with EUR/USD slipping 0.12% to 1.2355.

The single currency had hit a three week high of 1.2412 against the dollar on Tuesday but turned lower after a report showing that German economic sentiment deteriorated sharply again in April amid concerns over heightened international trade tensions.

The pound edged lower, with GBP/USD dipping to 1.4276, pulling further back from a post Brexit 22-month high of 1.4376 hit on Tuesday.

The pound eased after softer than expected UK wage growth data but investors were still expecting the Bank of England to raise interest rates in May.

The Australian and New Zealand dollar were lower, with AUD/USD down 0.24% to 0.7749 and NZD/USD sliding 0.41% to trade at 0.7313.

The Canadian dollar was also weaker, with USD/CAD rising 0.32% to 1.2592, backing away from the seven week lows set in the previous session ahead of the Bank of Canada’s monetary policy announcement later Wednesday.

While the BoC was not expected to raise rates expectations have been growing for a rate hike as soon as next month after recent strong economic data and investors will be looking for any hints that could support this view.