* Yen slips amid Japan monetary easing expectations
* Pound weakened by surprise drop in industrial output
* Euro up vs dollar; Greece comments add to positive view (Recasts, updates prices, adds comment, byline)

By Gertrude Chavez-Dreyfuss

NEW YORK, March 10 (Reuters) - The dollar slipped against the euro while the yen fell on Wednesday, as risk appetite improved in general with a rise in European and U.S. stocks, boosting demand for higher-yielding but riskier currencies.

The dollar and yen, however, gained some traction after risky assets such as gold, oil, and U.S. stocks fell from highs.

It's still a risk play. We saw gold and oil come off and that caused the dollar and yen to recover a bit, but overall the euro is still higher and dollar/yen is still up, said John McCarthy, director of foreign exchange at ING Capital Markets in New York.

He said the market is still in a buy dollar mode, but selectively, with investors still taking long bets on the greenback versus the euro and sterling, but not against the likes of the Norwegian and Swedish crowns.

A Reuters story that Japan's central bank may ease policy as early as next week pushed the yen to lows against the dollar and the euro. Looking forward, yen repatriation flows are expected to benefit the Japanese currency, as Japan's corporations looked to bring offshore earnings back home for their fiscal year-end this month.

In an environment where there is not a definite theme, the Bank of Japan looms large, said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.

The BoJ is leaning toward easing monetary policy again next week, sources said, but there is disagreement among policy makers on its board on how to justify such a move.

The dollar was up 0.6 percent versus the yen at 90.54 yen, after climbing as high as 90.82, according to Reuters data.

In early afternoon trading, the euro rose 0.4 percent to $1.3648, after hitting a session low of $1.3546 and a peak of $1.3679.

Trading in the euro was volatile with the single currency swinging between gains and losses against the dollar. The euro rallied 0.9 percent against the yen EURJPY= but that was more on yen weakness.

Comments on Wednesday from European officials about Greece, including from Greek Prime Minister George Papandreou, had little impact on the euro. Those remarks, though, did add to the overall view that Greece's debt crisis may be easing. For Papandreou remarks, see [ID:nWAT014212].

The pound, meanwhile, already under pressure, dipped after an unexpected drop in British industrial production data for January.

Sterling was down 0.3 percent at $1.4956, maintaining its downtrend amid worries about Britain's credit-worthiness and political uncertainty. Wednesday's weak industrial data added to the gloom.

Commodity-linked currencies, meanwhile, rose after China reported on Wednesday that exports and imports surged past expectations in February, underscoring the momentum in the world's third-largest economy.

The Australian dollar rose to a seven-week high against the U.S. dollar, according to Reuters data, but fell to trade little changed at US$0.9145.

The New Zealand dollar rose to a five-week high. It last traded at US$0.7055, up 0.4 percent. New Zealand's central bank is expected to keep interest rates unchanged when it announces its policy decision later in the day. (Additional reporting by Nick Olivari; Editing by Leslie Adler)

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