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HONG KONG - The dollar was on the back foot on Thursday after tumbling overnight, particularly against sterling and the euro, as U.S. yields paused their march higher, offering some relief to the bruised and battered yen.

Traders were also waiting for the European Central Bank meeting later in the day, to see whether they were in the same, more hawkish mood as their global peers.

"At the beginning of the week I was saying everything followed from the ongoing grind higher in U.S. yields, equities were off, the dollar was soaring, and now because of what's happening in Treasuries, everything has reversed," said Ray Atrrill global head of FX strategy at National Bank of Australia.

The benchmark 10-year Treasury yield was 2.7120%. It rose steadily earlier this month - driven by expectations of more aggressive Federal Reserve tightening to combat inflation - and reached as high as 2.836% on Tuesday, ahead of U.S. inflation figures.

However, while high, these were not quite as bad as some had feared, which observers said caused yields to pause.

The two year yield was also lower at 2.3604%.

The British pound rose to $1.3131 in early trade, its highest in a week against the dollar, after jumping 0.9% on Wednesday, its biggest daily percentage gain since June 2021, partly boosted by high inflation figures.

The euro too gained ground on the dollar, rising 0.54% on Wednesday, though fell against sterling

This left the dollar index which measures the dollar against six peers, at 99.818 after a 0.52% overnight tumble.

As well as the slow down in U.S. yields, Attrill said part of the moves could be explained by British CPI numbers coming in above expectations, "the money is flirting with the idea that the Bank of England could do 50 basis points in May - though we don't expect that".

The market was positioned for a hint that the ECB might draw a line under its quantitative easing programme in the second quarter rather than the third, said Atrrill.

"The risk is they are going to follow the path in terms of becoming overtly less dovish."

The Bank of Korea, on Wednesday, surprised markets with a rate hike, and the Monetary Authority of Singapore also tightened policy.

The Singapore dollar gained about 0.5% to a one week high on the dollar after the move. The Korean won was less concerned, rising 0.16%.

On Wednesday, the Bank of Canada and Reserve Bank of New Zealand both raised rates by 50 basis points, the largest hike for each in around 20 years.

The dollar weakened 0.6% on the loonie on Wednesday, after the move, but gained ground on the kiwi as the RBNZ indicated in its post‑meeting statement that the peak cash rate remains unchanged due to concerns about the global outlook.

The pause in yields meant the Japanese yen managed a small recovery in U.S. trade which continued into early Asia. It was last at 125.37 per dollar, having fallen to a 20 year low of 126.31 on Wednesday.

More than three-quarters of Japanese firms say the yen has declined to point of being detrimental to their business, a Reuters poll found, with almost half of companies expecting a hit to earnings.

(Reporting by Alun John; Editing by Lincoln Feast.)