FOREX-Weak stocks, doubts over govt plans boost yen, dlr

A record fall in euro zone industrial production strengthened the likelihood the European Central Bank will cut interest rates next month, something a string of ECB officials have given heavy hints to over the past week.
Meanwhile, the Bank of England's quarterly inflation report on Wednesday -- where it said it is ready to take unconventional policy easing steps and indicated it may be comfortable with a weaker exchange rate -- kept sterling under selling pressure.
"The fact we're in the middle of an economic downturn continues to drive periodic phases of risk aversion, sometimes short-lived," said Robert Minikin, head of FX strategy at Standard Chartered.
"We have seen a drop in dollar/yen over the past 48 hours ... but we're really only back to the average mean of the (recent) trading range," he said.
Disappointment after the U.S. bank rescue plan on Tuesday fell short on detail continued to pervade market sentiment. Investors remained wary despite U.S. Congress reaching a compromise deal on the economic stimulus package.
At 1230 GMT the dollar was down 0.4 percent at 90.05 yen and the euro was down 0.85 percent against the Japanese currency at 115.70 yen .
The dollar index was up 0.3 percent at 86.10 .DXY.
The euro was down 0.3 percent against the greenback at $1.2855 but was up 0.8 percent against the struggling UK pound at 90.35 pence .