The yen rose on Wednesday, with traders citing yen-buying by Japanese players, while the Canadian dollar held gains made on news of a huge takeover bid by global miner BHP Billiton for Canada's Potash Corp.

The yen dipped against the dollar and the euro in early Asian trading, staying on the defensive after retreating the previous day as U.S. and European shares rose and U.S. Treasury yields edged higher.

But the yen later received a boost, with market players citing yen buying by Japanese investors and exporters in yen crosses and the dollar.

The dollar shed 0.1 percent against the yen to 85.39 yen, slipping back toward a 15-year low of 84.72 yen hit on EBS last week.

The trend of dollar-selling looks unchanged, said a trader for a Japanese foreign exchange broker.

The yen has been sold a bit but there was no major slide, suggesting this was just a bit of a pullback move, the trader said, referring to the yen's decline the previous day.

The euro fell 0.5 percent to 109.64 yen, giving back much of the previous day's 0.6 percent gain and slipping back toward its lowest in nearly seven weeks of 109.07 yen hit on trading platform EBS earlier this week.

Against the dollar, the euro dipped 0.4 percent to $1.2838.

The dollar's moves against the yen have recently had a high correlation with U.S.-Japanese government bond yield spreads, which have narrowed as U.S. Treasury yields fell sharply in the past few months.

In addition to the talk of yen buying by Japanese exporters on Wednesday, a manager at a major Japanese bank said Japanese exporters were placing dollar offers from around 86.50 yen to 89.00 yen, having lowered their target levels for selling the dollar from around 90 yen previously.

The dollar edged up 0.1 percent against the Canadian dollar to C$1.0339, trimming a bit of its losses after shedding more than 1 percent against the Canadian dollar on Tuesday.

The Canadian dollar surged on Tuesday after BHP Billiton (BLT.L) (BHP.AX) launched an unsolicited $38.6 billion bid for Canada's Potash Corp.

JAPAN'S STANCE ON YEN

Investors are watching whether the Bank of Japan or the government will take new steps to rein in the yen's export-sapping rise ahead of a meeting between Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa expected next Monday.

Japanese authorities seem unlikely to conduct yen-selling intervention unless the yen's rise accelerates, market players say.

The more likely response by Japanese authorities would be some form of monetary easing by the BOJ such as expanding the amount or maturity of its three-month fixed-rate fund supplying operation, which the central bank decided to adopt last December after the dollar's drop below 85 yen in late November.

An options trader for a major Japanese bank said there was skepticism among Japanese traders about whether any BOJ easing measures would have much impact on the yen with Japanese interest rates already so low, and there were also doubts about whether the central bank would unveil any easing steps in the near term.

While market speculation about possible steps by the BOJ may lend support to the dollar against the yen for now, the dollar may eventually extend its decline if the market is disappointed by any BOJ measures or it takes no action, the trader said.

In the end there could be disappointment, in which case the dollar may fall toward 83 yen, he said.

(Additional reporting by Kaori Kaneko; Editing by Michael Watson)

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